Welfare economics.
Though many economic laws, formulas, theories and concepts often seem far removed from everyday life, economic policies affect the life of society, families and individuals. Welfare economics considers issues of equity or fairness. Economists examine how income and wealth are distributed among the population. And equity is realized through taxation. There is vertical and horizontal equity, which the amount of tax is based on. Vertical^ people with more income should pay more than those with less income. Horizontal: people with the same income should pay the same. Welfare ec. Is also about the impact our choices have on our lives. (pollution is negative externality of cars, beter mobility is positive ext.)
18. Government revenue and spending
Governments receive revenues from different sources with taxation as the main one. (progressive income tax and value added tax) Through taxation governments achieve different goals. They decrease the income gap between the rich and the poor, they discourage people from consuming harmful products and they control overall supply and demand. Most taxation revenues go on public goods which include national defence, street lighting, healthcare, education and others. The effects which economic activities have on people are called externalities. These may be positive or negative.
19. Wealth, income and inequality.
Wealth can include valuable belongings, money, gold, stocks and shares, works of art, land, property and precious jewels. Besides a salary or an unemployment benefit, there are other sources of income. For example, interest from savings in a bank or rent from property. The distribution of wealth in many countries has remained practically without change for many years. A large share of the wealth is concentrated in the hands of a small group of the population. Inequality is difficult to eradicate. The Lorenz curve shows the relationship between income and population, in other words it represents how income is distributed in the market economy. The extent of the inequalities in income distribution can be judged from the curve.
20. Poverty.
Poverty is a global problem. Though it is mainly associated with developing countries, to some extent it also exists in developed countries. When we speak about absolute poverty, we mean the people who live below the poverty line. People on a low income spend all the money they have on daily necessities. They cannot save.In many cases people and whole populations are caught in a trap: the poverty trap.
21. Macroeconomics.
The Great Depression was a devastating collapse for the American economy the effects of which were felt almost in every country of the world. The depression changed attitudes to the science of economics. After the depression of the 1930s, the most important aims of any government have become steady economic growth and control over inflation to avoid serious economic recessions. Fiscal policy is connected with the tax system and the budget of the country. By this policy the government can influence disposable income, demand and economic growth. The main tool of monetary policy is interest rates. The third mechanism is administrative pproach. This is a range of things that governments do to increase the supply of goods and services to the economy without increasing prices.
22.Aggregate demand and aggregate supply.
Aggregate demand is demand in the whole economy. It includes demand from consumers, companies, the government and customers abroad. It behave just like usual demand: demand falls as price rises. The value of all the services and products produced by the whole economy forms real national product. The growth or falldown of supply and aggregate supply in the short run is the same, but in the long run aggregate supply growth is not affected by price, but depends on the factors of production available in the economy.
23. Money
Before the use of money, which is taken for granted by people today, the basic system of payment was bartering. There are 2 problems: you cant be sure that anyone wants what you ve got and someone has what you want. The first commodity money was metal, salt and other valuable commodities. Such money lacked liquidity, that is the ability to circulate freely, but it stored value. Than people understood that they needed a good unit of account. Fiat money does not have any value, but only represents value. The coins and note we ue today are an example of fiat money.
24. Banks
If you save money, you may put it in a box under your bed, which is unsafe and unreasonable, or you may put it in a bank account. The money in an account earns interest. The main service which any bank provides to its customers is lending money. Banks are the most reliable lenders. If a client defaults on a loan, the bank uses interest to cover the losses. Though most clients pay back their loans, interest serves as a form of security. A banks' clients can make withdrawals at any time, as any bank keeps some percentage of the savings received from its clients as the reserve.
25. Fiscal policy
Fiscal policy regulates the functioning of the tax system and government spending. Both affect economic growth. A progressive taxation system operates in many countries of the world. The more money a person earns the higher the tax he pays. Government spending can affect economic growth through the so-called multiplier effect.
26. Monetary policy
Monetary policy involves making changes to the interest rate and controlling the money circulating in the economy. The interest rate is usually set by the central bank of a country, which also serves as a lender for commercial banks. When buying houses many people take out mortgages from commercial banks. If the interest rate increases, the mortgage becomes more expensive. If the interest rate is low, companies invest and expand their business, the national currency value falls and national goods and services become cheaper for foreign buyers. Exports begin to grow and more money comes into the economy.