Economic growth. Costs of economic growth.
It’s essential for people to know how economic growth is encouraged in a market system, about its advantages and disadvantages. It’s also vital to realize the costs that accompany the benefits of economic growth.
You realize that by saving some now, you will save more for the future. Societies also must save some of what they produce capital goods as well as consumer goods to meet future economic needs.
Long-range economic growth depends on the continued production of capital goods.
Everyone who works contributes to the growth of capital resources.
For example, when your manager bills customers for the work you did, the amount will be large enough not only to cover the company’s costs but also to invest in capital resources.
When your company uses this money to buy new equipment, it expects future returns from the equipment to justify the purchases.
In recent years, many people have argued that economic growth is a mixed blessing. The advantages of growth are fairly clear. As people produce more goods and services, the average standard of living goes up. Growth also keeps people employed and earning income. Growth provides the government with additional tax revenues, and it can spend more on programs for education, eater and air purification and so on.
But as for as we know there are the disadvantages same of them are use of natural resources that cannot be replaced; generation of waste products; destruction of natural environments; uneven growth among different groups of society, polluting air, land and waters.
If capital and natural resources are overused to promote economic growth now, future growth may be much slower.
9. The nation’s economy. GNP. Economic indicators.
One measure of an economy’s success that helps planners to make predictions about the future of the economy is gross national product. Microeconomics is the part of economics that analyses specific data affecting an economy. Macroeconomics is the branch of economics that analyses interrelationships among sectors of the economy.
Macroeconomists measure gross national product, or GNP, which is the value of all goods and services produced for sale during one year. Three factors limit the types of products counted. First, only goods and services produced during a specific year are counted. Second, economists count a product or a service only in its final form. Third, GNP includes only goods sold for the first time. When goods are resold or transferred, no wealth is created.
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One way in which economists measure GNP is the flow-of-product approach. Using this method they count all money spend on goods and services to determine total value.
Spending for products falls into four categories: expenditures of individuals for final goods and services, spending of businesses for new capital goods, spending of all levels of government, net exports of goods and services.
The earnings-and-cost approach accounts for all the money received for the production of goods and services, it measures receipts. Figuring GNP by counting what people receive requires calculating what the entire country earns for the goods and services it performs. Included in earnings are such things as business profits, wages and salaries, and taxes. To help predict expansion or contraction of the economy, economists identified a number of indicators. Leading, coincident, and lagging.
Leading economic indicators rise or fall just before a major change in economic activity. Coincident economic indicators rise or fall in the same time a major change in economic activity. Lagging economic indicators rise or fall after a change in economic activity.
A composite index is single number, for each of the three sets of indicators. These composite indexes are an average of all the indicators in each category.
10. Money. Banking and monetary policy. Money: roles, forms, functions.
Most people use money every day. It is so common that many people rarely think about why money is important and what gives it value.
Money is any item that is widely accepted as payment for products. It is something people see and use almost every day.
The familiar paper bills and metal coins are only two of the forms money can take. In the past, many things served as money – beads, shells, dog’s teeth, cattle, stones, tobacco, fishhooks and even slaves. Precious metals, especially gold and silver, have been a favorite form of money.
What is used as money often has little value of its own. Its value comes from the product for which it can be exchanged.
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In most modern economies money serves several functions.
As a means of exchange money is used to trade for goods and services.
As a store of value people use money to save their wealth for the future. Storing goods is not as easy as storing money. Many goods, such as food, spoil quickly. Others, such as cars, take up a lot of space.
As a standard of value money is used to compare the worth of one product with that of another. Everyone knows about how much a dollar will buy.
Money in the form of paper bills and metal coins is called currency.
Economists call things used for some of the functions of money near money. Credit cards, Insurance policies, stocks, and bonds are stores of value and can be exchanged for money.
Money is very important in our society. The market system determines how much money everything is worth.
You have your own beliefs about the value of goods, services, jobs, and people. Often the value you place on an item will differ from its monetary value. Your own values dictate what you are willing to do for pay.
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