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One of the advantages of economic growth is the creation of new jobs. Some people have jobs that did not exist 20 years ago. Part of them makes their living operating the computers. Millions of workers have jobs that computers have made easier.
However, the introduction of computers spelled unemployment for many workers, for example for typesetters. It also cut the managers’ stuff, make the management easier. Unemployment is the most undesirable consequence of economic growth. Unemployment causes social and economic problems.
Social problems are that unemployed who have been mild mannered lose their temper. They feel they are unnecessary.
Those who lost their jobs being in their forties or fifties hardly ever find new full-time job with a former salary. Many of the workers take jobs delivering flowers, polishing glass, stock-clerking, or driving taxes. Others do such odd jobs as painting and home repairs to earn income. Some of them try retraining programs, but find that employers are reluctant to hire older, experienced persons as beginners.
Retraining in new skills is only one solution to the problem, and not a simple one. Retraining is more useful to the young than to the old.
9 The nation’s economy. GNP. Economic indicators.
Analyzing a national economy involves many factors, some of which cannot be measured by data. One measure of an economy’s success that helps planners to make prediction about the future of the economy is gross national product.
Economists study different sides of the economy in different ways. Microeconomics is the part of economics that analyzes specific data affecting an economy. Macroeconomics is the branch of the economics that analyzes interrelationships among sectors of the economy.
Microeconomists use various methods to measure the performance of the economy. Statistics measure gross national product, or GNP, which is the value of all goods and services produced for sale during one year. All the goods and services produced must be counted, and their value determined.
In the United States the Department of Commerce computes GNP. Information is collected for every good or service produced in the nation during a year, but not everything is counted. Three factors limit the types of products counted.
First, only goods and services produced during a specific year are counted. Second, not every good or service produced or sold during the year can be counted. For example, if both the flour the baker used and the bread produced were counted, the flour would be added in twice and so exaggerate the gross national product. To avoid this problem, economists count a product or service only in its final form. They count the baker’s flour in its final product form – as a loaf of bread or cake. Products in their final form are called final goods and services. Third, GNP includes only goods sold for the first time. When goods are resold or transferred, no wealth is created.
One way in which economists measure GNP is the flow-of-product approach. Using this method, they count all the money spent on goods and services to determine total value. Each time a new product is sold, GNP increases.
Spending for products falls into four categories. The first, and the largest, consumer spending, includes all expenditures of individuals for final goods and services. Called personal consumption expenditures, this category accounts for about 65 per cent of GNP. The second category includes all spending of businesses for new capital goods. Since these purchases are investments, this category is called gross private domestic investment. It accounts for about 13% of GNP. The third category includes spending of all levels of government. Government purchases of goods and services account for about 21% of GNP. The fourth category is net exports of goods and services, about 1% of GNP.
Another way of determining GNP is the earnings-and-cost approach. This method accounts for all the money received for the production of goods and services, it measures receipts. Figuring gross national product by counting what people receive requires calculating what the entire country earns for the goods it makes and the services it performs. 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. The leading indicators include information about the number of workers employed, construction activity, and the formation of new businesses. 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.
Following and interpreting all economic indicators is time-consuming. The US Commerce Department, therefore, 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. The composite index comprises three major categories. The first category of statistics that make up the composite index of economic indicators is employment. The second category is production. The third category includes measures of business activity.
10 Money. Banking and monetary policy. Money: roles, forms, functions.
Money is necessary in most economies. It serves as a means of exchange and a store and standard of value. Currency, used in modern societies, fulfills these functions. In addition to currency, people may use checks and credit cards to purchase goods and services. Savings accounts, stocks, and bonds are stores of value that can easily be exchanged for money. All these forms of money and near money help the economy run smoothly.
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. In general, money is any item that is widely accepted as payment for products. It is something people see and use almost every day. Though money is commonplace, its forms and functions are complex. 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. Some of the things used as money – fishhooks or cattle, for example – also had value as consumer goods. 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. Less complex societies often do not use money at all. They simply barter, or trade, one product for another. Two farmers may trade a bushel of wheat for a jar of milk, for example. The more complex a country’s economy is, the harder it is to use a system of trading one good for another. Money is the answer to that problem.
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. But money can be kept in a bank or a safe or a pocketbook until it is needed.
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. People can therefore compare the worth of one $100 item with other items worth the same amount of money. The value of all goods and services the economy produces can be determined by adding up their prices. In this way, of course, economists determine GNP.
In the United States, money comes in several forms. Money in the form of paper bills and metal coins is called currency. The supply of currency is only about $700 per capita. Most money is in the form of checking accounts.
Sometimes, time deposits also are considered a form of money. Several other things are used like money. Economists call things used for some, but not all, of the functions of money near money. Credit cards, for example, allow a purchaser to borrow money from the seller of the purchased goods. Insurance policies, stocks, and bonds are stores of value and can be exchanged for money. They are other examples of near money.
Money is very important in our society. 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 as pets, paintings, medical care, and car washes. Then we can compare their value using the amount they cost. The market system determines how much money everything is worth. People whose jobs are thought to be more important get higher salaries than those whose jobs are considered less important. Thus, people often are judged by how much money they earn.
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. You may feel that some things are priceless and others are not worth as much as they cost. Your own values dictate what you are willing to do for pay.
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