What Is Economics?

Economics is a social science that focuses on the production, distribution, and consumpti♐on of goods and services. The study of econom♉ics is primarily concerned with analyzing the choices that individuals, businesses, governments, and nations make to allocate limited resources.

Economics has ramifications on a 🦂wide range of other fields, including politics, psychology, business, and law.

Understanding Economics

Assuming humans have unlimited wants withi🅘n a world of limited means, economists analyze how resources are allocat🐟ed for production, distribution, and consumption.

The study of microeconomics focuses on the choices of individuals and businesses, and 澳洲幸运5官方开奖结果体彩网:macroeconomics concentrates ꦰon the behavior of the economy on 💞an aggregate level.

One of the earliest recorded economists was eighth century B.C. Greek farmer and poet Hesiod, who wrote that labor, materials, and time needed to be allocated efficiently to overcome scarcity. The publication of 澳洲幸运5官方开奖结果体彩网:Adam Smith’s 1776 book “An Inquiry Into the Nature and Causes of the Wealth of Nations” sparked the beginning of the current Western contemporary economic theories.

Microeconomics

Microeconomics studies how individual consumers and firms make decisions to allocate resources. Whether a single person, a householdꦑ, or a business, economists may analyze how these entities respond to changes in price and why they demand what they do at particular price levels.

Microeconomics analyzes how and why goods are valued differently, how indivi♉duals make financial decisions, and how they trade, coordinate, and cooperate.

Within the dynamics of supply and 🐷demand, the costs of producing goods and services, and how labor is divided and allocated, microeconomics studies how businesses are organized and how individuals approach uncertainty and risk in their decis🌟ion making.

Macroeconomics

Macroeconomics is the branch of economics that studies the behavior and performance of an economy as a whole. Its primary focus is recurrent 澳洲幸运5官方开奖结果体彩网:economic cycles and broad economic growth and development.

It focuses on foreign trade, government fiscal and monetary policy, unemployment rates, the level of inflation, interest rates, the growth of total production output, and 澳洲幸运5官方开奖结果体彩网:business cycles that result in expansions, booms, recessioꦐns, and depressions.

Using aggregate indicators, economists use macroeconomic models to help formulate economic policies and strategies.

What Is the Role of an Economist?

An 澳洲幸运5官方开奖结果体彩网:economist studies the relationship between a society’s resources and its production or output, and their opinions help shape economic policies related to interest rates, tax laws, employment programs, internati𓃲onal trade agreements, and corporate strategies.

Economists analyze economic indicators such as gross domestic product (GDP) and the Consumer Price Index (CPI) to identify pot✱ential trends or make economic forecasts.

According to the U.S. 澳洲幸运5官方开奖结果体彩网:Bureau of Labor Statistics (BLS), 41% of all economists in the United States work for a federal or state agency. Economists are also employed as consultants, professors, by corporations, or as part of economic think tanks.

What Are Economic Indicators?

Economic indicators detail a country’s economic performance. Published periodically by governmental agencies or private organizations, economic ind🔜icators often have a considerable effect on stocksꦡ, employment, and international markets. They may predict future economic conditions that will move markets and guide investment decisions.

Gross Domestic Product (GDP)

澳洲幸运5官方开奖结果体彩网:Gross domestic product (GDP) is considered the broadest measure of a country’s economic performance. It calculates the total market value of all finished goods and services produced in a country in a given year. In the U.S., the 澳洲幸运5官方开奖结果体彩网:Bureau of Economic Analysis (BEA) also issues a regular report during the latter part of each month.

Many investors, analysts, and traders focus on the advance GDP report and the preliminary report, both issued before the final GDP figures because the GDP is considered a 澳洲幸运5官方开奖结果体彩网:lagging indicator,﷽ meaning it can confirm a trend but can’t predi🎉ct a trend.

Retail Sales

Reported by the U.S. 澳洲幸运5官方开奖结果体彩网:Department of Commerce (DOC) during the middle of each month, the 澳洲幸运5官方开奖结果体彩网:retail sales report measures the total receipts, or dollar value, of all merchandise sold in stores. Sampling retailers across the country acts as a proxy of consumer spending levels. Consumer spending represents more than two-thirds of GDP, proving useful to gauge the economy’s general direction.

Industrial Production

The 澳洲幸运5官方开奖结果体彩网:industrial production report, released monthly by the Federal Reserve, reports changes in the production of factories, mines, and utilities in the U.S. One measure included in this report is the 澳洲幸运5官方开奖结果体彩网:capacity utilization rate, which estimates the portion of productive capacity that is being used rather than standing idle in the economy. Capacity utilization in the range of 82% to 85% is considered “tight” and can increase the likelihood of price increases or supply shortages in the near term. Levels below 80% are interpreted as showing “slack” in the economy, which may increase the likelihood of a 澳洲幸运5官方开奖结果体彩网:recession.

Employment Data

The Bureau of Labor Statistics releases employment data in a report called the 澳洲幸运5官方开奖结果体彩网:nonfarm payrolls on the first Friday of each month. Sharp increases in employment indicate prosperous economic growth, and potential contractions may be imminent ifဣ significant decreases occur. These are generalizations, however, and it’s important to consider the current position of the economy.

Consumer Price Index (CPI)

The 澳洲幸运5官方开奖结果体彩网:Consumer Price Index (CPI), also issued by the BLS, measures the level of retail price changes and the costs that consumers pay, and is the benchmark for measuring 澳洲幸运5官方开奖结果体彩网:inflation. Using a basket that is representative of the goods and services in the economy, the CPI compares the price changes month after month and year after year. This report is an important economic indicat🔥or, and its release can increase volatility in equity, fixed-income, and forex markets. Greater-than-expected price increases are considered a sign of inflation, which will likely cause the underlying currency to depreciate.

Economic Systems

Five economic systems illustrate historical practices used t𓃲o allocate resources to meet the needs of the individ🍌ual and society.

Primitivism

In primitive agrarian societies, individual♔s produced necessities from building dwellings, growing crops, and hunt🐓ing game at the household or tribal level.

Feudalism

A political and economic system of Europe from the ninth to 15th centuries, feudalism was defined by the lords who held land and leased it to peasants for production, who received a promise of safety and security from the lord.

Capitalism

With the advent of the Industrial Revolution, 澳洲幸运5官方开奖结果体彩网:capitalism emerged and is defined as a system of production where business owners organize resources, including tools, workers, and raw materials, to 🍷produce goods for market consumption and earn profits. Supply and demand set prices in markets in a ♓way that can serve the best interests of society.

Socialism

澳洲幸运5官方开奖结果体彩网:Socialism is a form of a cooperative production economy. Economic socialism is a system of production in which there is limited or hybrid private ownership of the means of production. Prices, profits, and losses are not the determining factors used to establish who engages in the production, what to produce, and how to produce it.

Communism

澳洲幸运5官方开奖结果体彩网:Communism holds that all economic activity is centralized through the coordination of state-sponsored 澳洲幸运5官方开奖结果体彩网:central planners with common ownership of producti🔯on and distributionಌ.

Schools of Economic Theory

Many economic theories have evolved as societies and markets have grown and changed. However, three disciplines of economics—neoclassical, Keynesian, and Marxian—have ⭕influe♑nced modern society.

The principles of 澳洲幸运5官方开奖结果体彩网:neoclassical economics are often used as a framework to illꦿustrate the virtues of capitalism, including the tendency of market prices to re♚ach equilibrium as the volume of supply and demand changes. The optimal valuation of resources emerges from the forces of individual desire and scarcity.

John Maynard Keynes developed the theory of 澳洲幸运5官方开奖结果体彩网:Keynesian economics during the Great Depression. Arguing against neocl꧑assical theory, Keynes showed that rest🌸rained markets and government intervention in markets create a stable and equitable economic system. He advocated for a monetary policy designed to boost demand and investor confidence during economic downturns.

Marxian economics is defined in Karl Marx’s work “Das Kapital.” 澳洲幸运5官方开奖结果体彩网:Marxian economics is a rejection of the classical view of economics, arguing against the idea that the free market—an economic system determined by supply and demand with little or no government control—benefits society. He espoused that capitalism only benefits a select few and that the ruling class becomes richer by extracting value out of cheap labor provided by the working class.

The Bottom Line

Economics is a branch of the social sciences focused on the production, distribution, and consumption of goods and services. Microeconomics is a type of economics that is concerned with the behavior of individual people and businesses, while macroeconomics considers broader trends affecting nations and larger economies. In the U.S., a number of key economic indicators, including GDP and CPI, are important tools for economists to 澳洲幸运5官方开奖结果体彩网:measure trends and make forecasts.