Understanding the economy and coping with the economic environment is critical in today's business performance, which is a major concern for managers, investors, and the nation as a whole.
Most everybody these days can point to their own list of rising expenses. Electricity, air travel, medical care and even staples such as diapers cost more. Rents are jumping as the housing boom cools, just as property taxes are soaring to reflect the price appreciation of the hotter days.
Plus, interest charges are rising on credit card balances, home-equity lines of credit and adjustable-rate mortgages. This is how it feels when the days of cheap energy and easy money give way to $70 barrels of oil and ascending interest rates. The economy may be strong, but many people are feeling pinched. Economists say that feeling overshadows the fact that inflation overall is relatively low running at a 3.4 percent annual clip, the same rate as all of last year. The Federal Reserve has been raising interest rates for nearly two years to control inflation, and it is likely to again boost rates this week (Moody).
The rate increases were intended to slow a frenzy of consumption that built over the first half of this decade, when government policymakers used tax cuts and low interest rates to prod consumers to keep spending through a recession and the sluggish economic recovery that followed.
Consumers responded enthusiastically, snapping up autos, fueling a housing boom and splurging as a wave of mortgage refinancing turned rapidly appreciating homes into cash machines.
Higher interest rates, energy prices and other expenses are now causing some consumers to rethink their spending habits. So far, many families have been able to absorb the increases without ha ...