9. The nation’s economy. Gdp. Economic indicators.

The complete economy involves millions of individual economic units: households, firms and the departments of central and local government.

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 relationships among sectors of the economy.

Macroeconomists use various methods to evaluate the performance of the economy. Statistics measure gross domestic product-GDP-which computes the output produced by factors of production located in domestic economy. All the goods and services ,ust be counted, and their value determined. 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, economists count a product or service only 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. Using this method, they count all the money spent on goods and services to determine total value.

Spending for products falls into 4 categories. The first, and the largest, 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. This method accounts for all the money received for the production of goods and services. 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.

Following and interpreting all economic indicators is time-consuming. 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.

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

In general, money is any item that is widely accepted as payment for products. Its forms and functions are complex. Paper bills and metal coins are only two of the forms money can take. In the past, many things served as money –shells, stones, and tobacco. Precious metals, especially gold and silver, have been a favourite 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.

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. 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 so easy as storing money. 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. The value of all goods and services the economy produces can be determined by adding up their prices.

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 the 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. 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.

- In general, money is any item that is widely accepted as payment for products. 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.

- Functions of money: a mean of exchange, a store of value, a standard of value.

- Money in the form of paper bills and metal coins is called currency.

- Near money - things used for some, but not all, of the functions of money

- 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.