BASIC KNOWLEDGE OF THE ECONOMY
WHY DO CONSUMERS NEED TO KNOW HOW
THE ECONOMY WORKS

Some of you are probably saying, I dont need to know anything about the economy and how it works. It doesnt affect me. Lets see if this statement changes your mind:

The economy affects us as a voter, citizen, choices of careers, job change, interest rates and taxes. Knowledge of these things helps us to make sound investment decisions in our life. Its a huge indicator of inflation. Instability in the economy affects the stability of your job.

The U. S. economy is like a full stomach, when it starts to get hungry its an indication that you need satisfaction, if nothing is received to comfort the hunger, then it continues to send more indicators of hunger pains. If ignored for a long term then the person will expire. That is how the economy works. Knowing how these indicators work in our society helps us to plan our lives.

The stock market and interest rates are huge indicators of how consumer confidence keeps the economy flourishing with indication of Americas economic stability. When the consumer is having problems with not seeing the employment rates increase in a quarter (which is another indicator) then the consumer doesnt invest in industries or corporation and industry doesnt see a demand for his product. You will see the Dow-Jones Averages fluctuate or start falling on the news. This book is about stabilizing your debt not about the stock market, but as you can see all of us are affected by the health of the economy in the society we live and there are certain indicators that push its buttons.

For those persons who are interested in getting more basic knowledge of the stock market, here are definitions of the stock market indices and how they function:

DOW-JONES INDUSTRIAL AVERAGE (DJIA)

The Dow-Jones Industrial Average is the most well-known, but no the most accurate picture of the equity markets and most often quoted measured of the ups and downs of the stock market. It was created on May 26, 1896, by Charles Henry Dow, founder and publisher of the Wall Street Journal, to reflect the daily activity of the market in a two page summary called the Customers Afternoon Letter and it included only 12 stocks, primarily railroad stocks. Today the index has expanded to thousands. Dow-Jones stocks are chosen by the editorial board of the Wall Street Journal to give a broad overview of the market and American industries as a whole. Each company on the list represents a major industry and the stocks of the companies are widely held by large institutions like mutual funds and pension funds and by many individual investors.

STANDARD & POORS 500

This index is a much broader barometer of the stock market because it focuses on the Fortune 500 companies including manufacturers, financial stock, utilities and transportation stocks .Because of the broader coverage of stocks it provides a much more realistic gauge of how the market is performing on a daily basis. When the Dow moves up 50 points, this index may move up only 6 point.

VALUE LINE INDEX

The Value Line Index indicates a much broader reach of the market than even the Standard & Poors 500. The Value Line does not focus on specific industry groups or sectors NEW YORK STOCK EXCHANGE (NYSE Composite Index)

This index follow the stock listed on the New York Stock Exchange and doesnt consider other trading exchanges.

AMEX

The American Stock Exchange list smaller companies not listed on the NYSE.

THE NATIONAL ASSOCIATION OF SECURITIES DEALERS AUTOMATED QUOTATIONS (NASDAQ)

This system is where you find what is called penny stocks that newly issued inexpensive stocks of small companies selling from .10 cents to $10.00.

WILSHIRE 500

This index tries to give a daily performance average of all the stocks on all the exchanges in the United States.