The Price Point

The Price Point

As Stuyvesant students prepare to enter the world, understanding the economy becomes an essential skill. In today’s society, knowledge of economics provides us with a foundation for navigating financial issues, understanding the effects of public policy on the market, and making informed decisions about our own personal finances.

Fed Holds Rates Steady

Ending a trend of consistently lowering interest rates, the Federal Reserve held its federal funds rate steady after three consecutive cuts beginning in September 2024. Since this is the first Fed meeting during Donald Trump’s presidency, such a decision goes against his wish for the Fed to cut rates, but it offers an optimistic view on the labor market and the future of inflation—including progress towards the Fed’s goal to reach two percent inflation. For consumers, a lower Fed rate often means lower borrowing rates on loans such as mortgages—although mortgages have a trend of increasing interest—and means increased consumer spending.

Trump Pauses Mexico and Canada Tariffs for 30 Days

On Monday, President Donald Trump agreed to pause his tariff proposals on Mexico and Canada as long as they agree to support border strengthening. These efforts include restricting the flow of fentanyl into the United States, labeling drug cartels as terrorist organizations, and launching a “Canada-US Joint Strike Force” to combat organized crime. For Mexico, the agreement is very similar—it is centered around the smuggling of drugs and, most importantly, illegal immigration. However, the 10 percent tariff on China has gone into effect. While these tariff pauses do help ease the risk of a trade war erupting, they are only for 30 days. Additionally, the Trump administration has mentioned plans to impose tariffs on goods imported from the European Union.

Scott Bessent Confirmed as Treasury Secretary Under the Trump Administration

On January 27, Scott Bessent was confirmed by the Senate as the United States’s 79th treasury secretary in a 68 to 29 vote. Bessent, a billionaire investor, is the first openly gay person in the role. As a former Democrat who once worked for George Soros, Bessent has become an avid supporter of Trump and promotes the renewal of Trump’s Tax Cuts and Jobs Act by Congress. However, Bessent did face some pushback from Democratic Party senators regarding Medicare tax avoidance of almost one million dollars. Other Democrats support Bessent, pointing to some policies of his that will bring down costs for the middle class.

Economics Concept of the Issue

Game Theory

Game theory is an economics concept that explores how individuals or companies make decisions that have an impact on others and is often applied to competition between businesses or negotiations. Game theory is also a mathematical concept that often analyzes situations in which different “players” make decisions that will impact other players; the outcome of a decision depends on both the player’s own choice and those of other players. The most common example of game theory is the Prisoner’s Dilemma, in which players may choose to cooperate or betray each other; while the best outcome happens when both players choose to cooperate, many players will choose to betray. Game theory helps us understand the behavior of companies and individuals in industries with various levels of competition and strategy.