What Are The Economic Terms – Economics is a social science that focuses on the production, distribution and consumption of goods and services, and analyzes the choices made by individuals, businesses, governments and countries to allocate resources.
Assuming that people have unlimited wants in a world with limited means, economists study how resources are allocated for production, distribution and consumption.
What Are The Economic Terms
The study of microeconomics focuses on the choices of individuals and businesses, while macroeconomics focuses on the behavior of the economy as a whole, at an aggregate level.
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One of the first recorded economists was the 8th century BC. The Greek farmer and poet Hesiod, who wrote that labor, materials and time must be distributed efficiently to overcome scarcity. The publication of Adam Smith’s book in 1776,
Microeconomics studies how individual consumers and firms make decisions to allocate resources. Whether it’s an individual, a household or a business, economists can study how these groups react to changes in price and why they want what they do at the rates they do. special prices.
Microeconomics analyzes how and why goods are valued differently, how individuals make financial decisions, and how they work, coordinate and cooperating.
Within the dynamics of supply and demand, the costs of producing goods and services, and how labor is divided and distributed, microeconomics examines how businesses are organized and how individuals ‘ deal with uncertainty, and the risks of decisions.
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Macroeconomics is the branch of economics that studies the behavior and performance of an economy as a whole. Its main focus is the cyclical economic cycles and broad economic growth and development.
It focuses on foreign trade, government fiscal and monetary policy, unemployment, the rate of inflation, interest rates, growth in total manufacturing output, and business cycles that cause expansions, booms, recessions, and depressions .
An economist studies the relationship between society’s resources and their output or output, and their ideas help shape economic policy related to interest rates, tax laws, employment programs, trade agreements international, and corporate strategies.
Economists analyze economic indicators, such as gross domestic product and the consumer price index, to identify trends or make economic forecasts.
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According to the Bureau of Labor Statistics, 36% of economists in the United States work for a federal or state agency. Economists are also employed as professors, by companies or as part of economic think tanks.
Economic indicators detail the economic performance of a country. Periodically published by government agencies or private organizations, economic indicators often have a significant impact on stocks, employment and international markets, and often predict future economic conditions. that move markets and drive investment decisions.
Gross domestic product (GDP) is considered the most widely used measure of a country’s economic performance. It measures the total market value of all finished goods and services produced in a country in a given year. The Bureau of Economic Analysis (BEA) also publishes a regular report in the latter part of each month. Many investors, analysts and traders focus on the advance GDP report and the preliminary report, both released before the final GDP numbers, because GDP is considered a major indicator, meaning that it can determine movement, but not predict movement.
The GDPNow forecast model used by the Federal Reserve provides a “nowcast” of the official estimate before its release by estimating GDP growth using a similar approach to that used by the Bureau of US Economic Analysis.
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Reported by the Department of Commerce (DOC) in the middle of each month, the retail sales report is closely monitored and measures the total revenue, or dollar value, of all goods sold. sold in stores. A nationwide sampling of retailers acts as a proxy for consumer spending levels. Consumer spending represents more than two-thirds of GDP, which is useful in assessing the general direction of the economy.
The industrial production report, published monthly by the Federal Reserve, reports on changes in the production of factories, mines and facilities in the United States. instead of being sluggish in the economy. Capacity utilization in the range of 82% to 85% is considered “tight” and could increase the likelihood of price increases or supply shortages in the short term. Levels below 80% are interpreted as indicating “slack” in the economy, which could exacerbate a recession.
The Bureau of Labor Statistics (BLS) releases employment data in a report called Nonfarm Payrolls on the first Friday of each month. A sharp increase in employment indicates good economic growth and a contraction may occur in the event of a severe recession. This is a generalization and it is important to consider the current state of the economy.
The Consumer Price Index (CPI), also issued by the BLS, measures the rate of changes in retail prices, and the costs paid by consumers, and is the benchmark for inflation. measurement Using a basket that represents goods and services in the economy, the CPI compares price changes on a monthly and year-over-year basis. This report is an important economic indicator and its release can increase volatility in the equity, fixed income, and forex markets. A larger-than-expected price increase is seen as a sign of inflation, which tends to depreciate the base currency.
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Five economic systems show historical practices used to allocate resources to meet the needs of the individual and society.
In primitive agricultural societies, individuals made ends meet from building dwellings, growing crops, and hunting game at the household or tribal level.
A political and economic system in Europe from the 9th to the 15th century, feudalism was defined by lords who held land and leased it to farmers for production who received a guarantee of security and safety from the lord.
With the advent of the industrial revolution, capitalism emerged and is defined as a production system where business owners organize resources, including machines, workers, and raw materials to produce goods for consumption in the market and to earn profits. Supply and demand set prices in the markets in a way that can serve the good of the community.
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Socialism is a type of cooperative production economy. Economic socialism is a system of production where there is limited or hybrid private ownership of the means of production. Prices, profits and losses are not the decisive factors in determining who will be involved in production, what to do and how to produce.
Communism holds that economic activity is centralized through the coordination of state-sponsored central planners with collective ownership of production and distribution.
Many economic theories have evolved as societies and markets have grown and changed. However, three disciplines of economics, neoclassical, Keynesian and Marxian, have influenced modern society.
The principles of neoclassical economics are often used as a framework to illustrate the virtues of capitalism, including how market prices tend to reach equilibrium as the quantities of supply and demand change . The optimal valuation of resources arises from the forces of individual desire and scarcity.
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John Maynard Keynes developed Keynesian economic theory during the Great Depression. Arguing against neoclassical theory, Keynes showed that unfettered markets and government intervention in markets create a stable and balanced economic system and proposed a monetary policy that stimulated demand and investor confidence during economic downturns.
. Marxian economics rejects the classical view of economics, which argues against the idea that the free market, an economic system determined by supply and demand with little government control, is beneficial to society- social. He stressed that capitalism only benefits a select few and that the ruling class gets richer by extracting value from cheap labor provided by the working class.
A command economy is an economy where production, investment, prices and income are centrally determined by a government. A communist society has a command economy.
Since 2000, several economists have won the Nobel Prize in Economics, including David Card for his contributions to labor economics, Angus Deaton for his study of consumption, poverty and welfare, and Paul Krugman for his analysis of trading patterns.
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Requires writers to use primary sources to support their work. These include white papers, government data, original reports, and interviews with industry experts. We also refer to original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.HT to Kanchan Bandyopadhyay for this Bloomberg piece by Noah Smith titled ‘5 Economics Terms We All Use’
He suggests that instead of the usual economic terms that refer to recession, decline, boom, unlimited trade deficit etc. It recommends the following:
Something is strange if you don’t know if it is cause or effect (or both). For example, in the simple supply and demand model, there may be a change in consumer tastes or preferences (exogenous change). This leads to unusual changes in demand and thus the equilibrium price and quantity.
Economists like to say “at the margin.” This refers to small changes instead of large overall effects. Another example is the importance of effort versus natural talent. Natural talent may be pretty important on average, but a little more effort could go a long way