ECO/561

Week Six Learning Team Deliverable
In week six our learning team reviewed course material for improving business decisions, economic concepts, and strategic planning. Our team gathered information to learn how to project the effect of credit markets on the economy, and the effect of global economic conditions regarding trade and specialized business decisions. We discussed the influence of growth on the economy and how important it is for a country to sustain growth.
We learned about the basics of currency trading with the exchange rate and the two basic types. The spot exchange rate where the current rate is at the moment, and the forward exchange rate projected for a specific time in the future, for instance 30, 90, or 120 days from now. This is beneficial to know when comparing the exchange of currency one to another. The exchange rate of one currency cannot go too high or too low from other currency as it will affect import and export trade value too drastically.
Our team learned there are basic macroeconomic relationships to consider in economics. The Income-Consumption and Income-Saving relationships show income that is disposable in a household and income saved. The economy depends on the flow of income consumption spent, and income saving are non-income determinants, which also consists of wealth and borrowing money. Interest-Rate-Investments relationships show the marginal benefit for the rate of return or profit and the cost of the interest rates, which is profit for borrowing funds. The goal for businesses lending money is for the rate of return to exceed the interest rate. The multiplier effect shows the relationship in spending and changes in the GDP. Initial change in spending is a critical time in change as it creates an increase in the GDP and sets off a chain of spending.
In projecting the effect of global economic conditions in trade, foreign exchange is one condition previously mentioned. We learned the money definition of M1 and M2. M1 are any coins and paper currency, checkable deposits, and consists of approximately 56% of the M1 money in the U.S. M2 money consists of savings and money market savings accounts. Credit cards are not money but “economize” the use of currency. The Federal Reserve System or the U.S. central bank issues out money coins printed by the U.S. Mint and paper money by the Bureau of Engraving and Printing.
Lawrence
We also learned the way banks make money off of debt. As perplexed as it is, banks charge us for using our money to make more money for themselves. I have a problem with this, but, we have no choice. I have been trying to figure out how I can change this. The only solution is to take all of your money out of the bank and store it in a safe place. This is assuming you care not for interest or dividends paid to your account. It is only mere pennies anyway! The way banks do this is take your thousands of dollars and investing it in stocks and bonds and other short term commodities to make a quick profit. That profit can be hundreds of dollars. The amount you see is literally pennies, depending on if you have hundreds of thousands or just thousands in your account.
This process is a sure way for banks to continue to make money, and lots of it! As we continue to direct deposit our hard-earned funds into the banking system, they make an informed decision on how much they can count on you keeping in your account from a month-to-month or quarter-to-quarter basis. With this information, banks make informed decisions based on your loyalty. When they know they can count on you always depositing and saving your money, they make more money on your loyalty. If we take our money out of banks and just spend cash, banks cannot make money off of our money. However, since we now know this, we can also get in the business of loaning money to those people we know that will pay us back with interest. There are many examples of businesses that loan money at high interest rates to people every day. One such example is Advanta, a loan place that charges its customers 30% interest on short term loans. There is also Loan Me, another company that charges 25% and more to people every day. Another example is Check-n-Go, a loan company that allows you to write them one of your personal checks for cash and the face value of your check becomes considerably less than what you actually wrote the check for.
Let’s assume you write a check for $300.00 to Check-N-Go. You agree upon a date that the check is written for, say two weeks later. Check-n-Go gives you $250.00 in cash. Two weeks later, Check-N-Go cashes that check and receives $300.00. You have just gave away $50.00 without even thinking about it. You probably could have easily paid your neighbor $10.00 to do the same thing. But to save face, people would rather pay for convenience and starve, than to use their common sense, and live another day with their dignity.
Conclusion
In conclusion, we talked about how the basics of currency trading with the exchange rate and the two basic types. The spot exchange rate where the current rate is at the moment, and the forward exchange rate projected for a specific time in the future. The Income-Consumption and Income-Saving relationships show income that is disposable in a household and income saved. We discussed the money definition of M1 and M2. We also discussed how banks make money off of debt and how loan institutions charge people exorbitant interest rates to make a profit.

References
McConnell, C. R., Brue, S. L., & Flynn, S. M. (2009). Economics, Principles, Problems, and Policies (18th ed.). : McGraw Hill. Retrieved from https://ecampus.phoenix.edu/content/eBookLibrary2/content/TOC.aspx?assetdataid=80baa9e6-9131-47eb-9f11-811b6dc03ea1&assetmetaid=c35a3b95-8157-4874-a599-92eeee3896a3