Progress:

Throughout the past few weeks, I have mostly learned about financial institutions and the different types of inflation. By definition, a financial institution is a business entity that offers services as intermediaries for different monetary transactions. The financial institutions that we covered were central banks, credit unions, and insurance companies.

Central banks are not just your average bank. They are financial institutions that control the production and distribution of money for a nation or a collective of nations. They also oversee any other banks and financial institutions. In Canada, we have the Bank of Canada as our central bank. As I mentioned in my previous post, the Bank of Canada serves many purposes that all benefit the welfare of Canada. Through their monetary policy alone, they control the economy’s fluctuations and inflation. However, central banks stand out from average banks because they have a legal monopoly status. This status allows them to issue banknotes and cash, while private commercial banks are only allowed to provide demand liabilities.

Secondly, credit unions are financial institutions owned, created and operated by their own members. They exist to provide better products and services to their members without seeking a profit. Credit unions function by having their members accumulate their money in the cooperative’s shares to provide demand deposit accounts, loans, and other financial services for one another. For instance, one member’s savings in the credit union would go towards a loan for another credit union member.

Insurance companies are financial institutions that focus on protecting the assets of the customers. They work by assuming the risk of damage or loss to the customer’s property, whether the asset is a car or house, and pay the amount needed to fix or replace it in exchange for regular fees. Car insurance is a notable example of how insurance companies work. When somebody gets into a car accident with insurance, the company that provided the insurance will cover the damages to the vehicle.

Inflation is categorized into two types, demand-pull inflation and cost-push inflation. As the name implies, demand-pull inflation is when the demand for goods and services exceeds the supply. This lack of resources causes the prices of products and services to increase. In most of these scenarios, the consumers have more money to spend than the amount needed to buy available products and services. However, the high prices eventually lead to increased supply and a balance forms between the demand & supply. The term for this divergence between supply and demand is called equilibrium.

Cost-push inflation happens when production costs increase. These costs can be anything from material expenses to wage increases. Commonly, cost-push inflation starts with something small like the increase in wages for an enterprise. However, as wages rise, others may want to be paid the same increased wage. With more money being spent on the labour and work needed to function, businesses raise prices to keep up. Once one company starts raising prices, others tend to do the same, and costs keep rising uncontrollably in every market. This process is also referred to as the “wage-price spiral” and can cause disruptions in the economy if left unchecked.

1. What has been your most difficult mentoring challenge so far? Why?

My In-depth topic of stock trading is not as simple as I once thought. Understanding how all the economic factors work together with the stock market is complex and challenging. The current challenge I face is keeping track of all the different parts of an economy and remembering how they correlate with each other. My father has been exceptional in explaining the different ways each business matter ties back to my original topic of stock trading, but I still struggle with putting it all together in my head. Before and after each mentorship session, I have been doing research and taking notes about the topics we discuss. I believe that it is only because of these notes that I have been able to remember the information from each lesson.

2. What is working well? Why?

My father and I continue to communicate well during all our mentorship lessons. I feel very comfortable talking with my father and discussing my questions with him. Since our communication is proficient, our efficiency during our mentorship lessons is also adept. At most, our sessions last around an hour each. The comfortability we experience with each other stems back to our relationship and familiarity with one another. I can only imagine how the In-depth project could have gone if I did not have my father as my mentor.

3. What could be working better? How can you make sure this happens?

As I mentioned before, picturing the stock market and how it works in my mind has been challenging. I have also been using a fake stock market account from school to see how trading and buying would work if I had a stock portfolio in real life. However, I still struggle to apply the knowledge I am learning in my lessons to grow the money in my account. So far, all the investments I have made in companies have been using my knowledge and research alone. To fix my portfolio and start growing my money effectively, I will ask for my father’s assistance. That way, I learn how to succeed in the stock market and gain more expertise in the economy.

Image Resources:

• https://www.thoughtco.com/overview-of-the-demand-curve-1146962