May 16 2009
Economy or Economics
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Let’s Learn The Economy Economy has its own waves, cycles and evolution. It is developing so, it is not repeating the same thing. It has waves (or cycles) so, it may repeat the similar graphic with similar ups and downs. First of all, economy is science too. Not like physics or math but, it is science. So, we should learn it. We should have a scientific approach to it. You can be a good lawyer but, you may fail in economics. In August 2008, they asked to Mc Cain and Obama “Do you think that economy will go worse before it gets better?” What did they say? Mc Cain said: “No.” Obama said: “No.” Now we know that the answers were wrong!“ When drafting plans in January to spend roughly $800 billion to stimulate the deteriorating economy, the Obama administration operated on the assumption that the unemployment rate would reach 8.9 percent by the end of the year — without the extra federal spending. Three months into the year, the unemployment rate has already soared to 8.5 percent, from 7.6 percent, the highest level in more than a quarter-century.” Obama’s administration’s estimate was not accurate but Obama is smart guy. He can learn.We all can learn too if we pay attention to the issue. We all need to learn the basics of economics, the science of economy. |
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The Basics Of Economics Economy develops in waves. It is developing so, it is not repeating the same thing. It has waves (or cycles) so, it may repeat the similar graphic with similar ups and downs.First of all, we can handle economy in a scientific way. Economics is not like physics or math but, still it is science. So, we should learn it. We should have a scientific approach to it. You can be a good lawyer but, you may fail in economics.We all need to learn the basics of economics, the science of economy.Let’s start from somewhere. 1- Supply and demand balances each other. 2- Power of purchase: (POP) If an economy creates supply it needs equal demand.Supply is products and services created by companies, governments, nonprofit organizations or any businesses.Demand is the power of purchase. If all over the country suppliers make 10% profit, power of purchase will be 10% less. So, demand will be 10% less than supply. That is the problem. If all over the country suppliers make 100 trillion profit, power of purchase will be 100 trillion less. So, demand will be 100 trillion less than supply. That is the problem. How can we handle this problem? Don’t be scared! Just watch what’s going on and we will learn all together. 3- Global and national POP Global POP = supply - (profit - investments) - savings. National POP = national supply (GDP=gross domestic production) + investments + export + tourism income - national profit - national savings - import - tourism spending. 4- Economic GAP = Supply - POP 5- Waves of economy Economy develops in waves. Like an ocean, it rises sometimes (boom), slows down at the beach (recession) and then retreats. What happened is supply and demand (POP) reached a balance. Did POP increase? No. Businesses are closed and supply decreased. When economy rise production, GDP (gross domestic production), income increases. Annual economic growth is positive (more than zero %). 6- Common characteristics of economic waves - Economy does not follow a smooth and steady path. What can human being do to prevent a recession or stopping a retreat? |
