ECONOMIC: Common Rules of Thumb

Posted on January 21, 2026 by Dr. David Edward Marcinko MBA MEd CMP™

By Dr. David Edward Marcinko; MBA MEd

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Common Economic Rules of Thumb

Here are some widely used heuristics in economics:

Growth & Investment

  • Rule of 70: To estimate how long it takes for an economy to double in size, divide 70 by the annual growth rate. For example, at 2% growth, GDP doubles in 35 years.
  • Okun’s Law: For every 1% drop in unemployment, GDP increases by roughly 2% — a rough link between labor and output.
  • Taylor Rule: A guideline for setting interest rates based on inflation and economic output gaps. Central banks use it to balance inflation and growth.

Inflation & Employment

  • Phillips Curve: Suggests an inverse relationship between inflation and unemployment — lower unemployment can lead to higher inflation, and vice versa.
  • NAIRU (Non-Accelerating Inflation Rate of Unemployment): The unemployment rate at which inflation remains stable. Going below it may trigger rising prices.

Fiscal & Monetary Policy

  • Balanced Budget Multiplier: Increasing government spending and taxes by the same amount can still boost GDP — because spending has a stronger immediate effect.
  • Debt-to-GDP Ratio Threshold: Economists often flag a ratio above 90% as a potential risk to economic stability, though this is debated.

Trade & Exchange

  • Purchasing Power Parity (PPP): Over time, exchange rates should adjust so that identical goods cost the same across countries — a rule used to compare living standards.
  • J-Curve Effect: After a currency devaluation, trade deficits may worsen before improving due to delayed volume adjustments.

Trade

  • Leading Indicators: Metrics like stock prices, manufacturing orders, and consumer confidence often signal future economic shifts.
  • Recession Rule of Thumb: Two consecutive quarters of negative GDP growth typically indicate a recession — though not officially definitive.

These rules simplify complex relationships, but they’re not foolproof. They’re best used as starting points for analysis, not as rigid laws.

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PEP: What is a Pooled Employer “Defined Contribution” Plan?

Posted on March 2, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

RETIREMENT PLANNING

By Staff Reporters

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A PEP is a defined contribution plan, such as a 401(k), in which multiple employers can participate. When employers join a PEP, they delegate their named fiduciary role to a third-party pooled plan provider (PPP). PEP fiduciary oversight falls on the PPP rather than the employer. And although each PPP may set its own eligibility requirements, businesses joining a PEP benefit plan needn’t operate in the same industry or geographical area.

PEP plans provide viable 401(k) alternatives for small business owners who may otherwise struggle to compete for talent against large organizations with comprehensive benefits packages.

CITE: https://www.r2library.com/Resource/Title/082610254

Other advantages include: Less in-house administration: The PPP assumes responsibility for much of the plan administration, handling all plan documentation, governmental filings and ongoing compliance. Employee payroll deductions are left to the employer, but these can be efficiently managed with the help of a payroll service provider that integrates payroll and benefits.

Tax credits can help offset PEP start-up costs. For the first three years of participation, employers may be eligible for a tax credit of $5,000 annually, with an additional $500 available to those who set up automatic enrollment. Under Secure Act 2.0, an additional credit of up to $1,000 per employee for eligible employer contributions may apply to employers with up to 50 employees for the preceding taxable year. This credit phases out from 51 to 100 employees.

Businesses participating in single-employer retirement plans (SEP) must independently communicate and coordinate with their record-keeper, custodian, investment advisor, trustee and auditor. With PEP, all these tasks and services are bundled into one, saving employers time and money.

Despite its advantages, a PEP does have some drawbacks, particularly when compared to an SEP. Unlike a PEP, an SEP gives employers more of the following:

  • Flexibility: Employers can customize the design of their plan to meet their retirement goals and the needs of their employees.
  • Control: Employers are not dependent on the actions or decisions of others and can access information and resolve problems directly without the need of a third party.
  • Choice: Employers have the unilateral freedom to choose a different service provider, move their plan or negotiate better pricing if they are unsatisfied with the cost or quality of service.

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