Costs of economic growth. Labor problems


Economic growth has advantages and disadvantages. One of the disadvantages was introduction of computers in the 1970s, which spent unemployment for many workers. A lot of workers were laid off and try unsuccessfully to obtain another job. Unemployment was closely connected with age, ability to obtain new skills, family states and so on. Young and enterprising people could easily found a full-time job. Young people in list in retraining programs or agree to less-paying jobs. Employers are reluctant to retrain elderly people or people after 50. However, this still have to work some were until their retirement age. The technological advances have a great impact on the demand for labor. Some jobs are eliminated, and some new jobs are created. So, we can say economic growth and his costs of benefits. Government should provides free retraining programs for the unemployed. The costs of training workers are high, but the social costs of not training them are even higher. Because unemployment can lead to higher crime rates and social actions. To be able to remain competitive in the labor market, we should require new skills and be able to change with the economy.



The nation’s economy. GNP. Economic indicators.


Economists study different sides of the economy in different ways. Microeconomics is the part of economics that is concerned with individual areas of economic activity. Macroeconomics is the branch of economics that is concerned with the major, general features of a country’s economy.

Macroeconomists use various methods to evaluate the performance of the economy. Statistics measure gross domestic product, or GDP. GDP is the value of all final 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 in its final form. Third, GDP includes only goods sold for the first time.

One way in which economists measure GDP is the flow-of-product approach. It counts expenses.

Spending for products falls into four categories. The first, consumer spending, includes all expenditures of individuals for final goods and services. The second category includes all spending of businesses for new capital goods. The third category includes spending of all levels of government. The fourth category is net exports of goods and services.

Another way of determining GDP is the earnings-and-cost approach. It measures receipts. Included in earnings are such things as business profits, wages and salaries, and taxes the government receives for its services. Also counted are interest on deposits, money received as rent, and any other forms of income.

To help predict expansion or contraction of the economy, government economists identified a number of indicators. They fall into three categories: leading, coincident and lagging. Leading economic indicators rise or fall just before a major change in economic activity. Coincident economic indicators change at about the same time that shifts occur in general economic activity. Lagging economic indicators rise or fall after a change in economic activity.

The US Commerce Department lists a composite index, or single number, for each of the three sets of indicators. These composite indexes are an average of all the indicators in each category.


Money. Banking and monetary policy. Money: roles, forms, functions.

Most people use money every day. In general, money is any item that is widely accepted as payment for products. Though money is commonplace, its forms and functions are complex. In the past, many things served as money. Precious metals, especially gold and silver, have been a favorite form of money. Most of the items used as money, however, have had value only because people agreed that they could be exchanged for goods and services. In other words, what is used as money often has little value of its own. Its value comes from the product for which it can be exchanged.
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.

As a standard of value money is used to compare the worth of one product with that of another.

State-issued money which is made legal tender by a government decree is known as fiat money or money without intrinsic value. In most countries, money comes in several forms. Money in the form of paper bills and metal coins is called currency.
Sometimes, time deposits also are considered a form of money. Economists call things used for some, but not all, of the functions of money near money. Credit cards, insurance policies, stocks, and bonds are stores of value and can be exchanged for money. They are other examples of near money.
As a store and a standard of value and as a means of exchange, money helps the economy run smoothly. We can judge the worth of such diverse things. We can compare their value using the amount they cost. The market system determines how much money everything is worth.


The supply of money.

Your personal supply of money changes often. Increases and decreases in your supply of money probably affect how much you spend. Similarly, the amount of money in the total economy changes often. Changes in the economy’s money supply are more complex than changes in a personal money supply. Still, these fluctuations of the money supply influence not only how much spending occurs but also the general level of business activity. The money supply of the United States is constantly changing. Sometimes it expands and sometimes it contracts. The government prints new bills and mints new coins every year to replace those that are worn. It also changes the money supply to meet people’s needs. The supply of checking account money, or demand deposits, also changes. Banking laws in the United States require a bank to put a certain percentage of its deposits in reserve. A bank’s reserve is the money the bank must be 10 percent of total deposits.

This expansion of the money supply does not continue forever. A deposit in a checking account can increase the money supply by about 5 times the original amount. Several factors stop the process of expansion or even reverse it.

First, federal law requires the bank to keep a percentage of its demand deposits in reserve, usually 10 to 20 percent. Banks cannot loan out all of the money people deposit.   

Second, expansion will stop if the bank stops making loans. Lending may cease if the bank cannot find any more people it believes will be able to repay a loan. Also, if people stop putting their money into checking accounts, the bank will not be able to make loans.

Finally, if many people suddenly withdraw their money all at once, the bank must do more than stop making loans. It will have to start calling for payment of its loans so that it can increase its reserves.


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