The Numbers Of Economics

Christine McLennan

Five Stages of Material Economy

1. Extraction

2. Production

3. Distribution

4. Consumption

5. Disposal

The process starts with extraction, in which natural resources are extracted from the land to be used for products. The methods of extraction are damaging to both the land and the people who live on the land. After materials are extracted, they are used to create products. Production requires energy, which can also be a finite resource. Chemicals are also needed to create these products. The products become toxic as a result of the chemical exposure, and are sent out to stores for distribution. Stores want to advertise their products and get consumers to buy them as fast and frequently as possible. This is achieved by planned obsolescence and perceived obsolescence. With Planned obsolescence, products wear out faster so that consumers have to buy them more often. Many companies have capitalized on the consumers need to feel current and trendy with perceived obsolescence. Consumers are pressured to buy things that make them feel trendier so that they can gain social acceptance. Once an item breaks or is no longer "cool," it is promptly disposed of. Trash ends up in landfills or is first burned and then dumped in a landfill. The rate at which natural resources are extracted, products are produced and then thrown away is unsustainable. In order for the system to be sustainable, it must be a circular system instead of the linear system currently in place.

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Five Things to Learn From the U.S Debt Clock

1. Our national debt is currently 16 trillion dollars. However, our total debt (household, business, state and local governments, financial institutions and the federal government) is about 56 trillion dollars.

2. If every person in the United States had an equal share of the national debt, they would owe $53,000 dollars. If only tax payers had an equal share of the national debt, they would owe $148,000.

3. The United State's largest budget items are medicaid/medicare, social security, defense spending, net interest on debt, and federal pensions.

4. Total personal debt is almost equal to the national debt. Mortgage debt makes up 13 trillion dollars of the total personal debt. Credit card debt and student loans each make up one trillion of the total personal debt.

5. Our gross debt to GDP ratio is 107% This means that our debt exceeds what we produce each year.

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Six Pillars of Free Enterprise

1. Private Property: People and businesses own capital and resources, as opposed to the government owning them.

2. Specialization: Businesses and people focus on making one particular product or the parts of a product.

3. Voluntary Exchange: People sell and buy objects in order to acquire what they want.

4. The Price system: When buyers and sellers make exchanges, they determine the prices for goods, services, and resources.

5. Market Competition: The rivalry found between buyers and sellers when selling and buying products.

6. Entrepreneurship: Seeing opportunities for financial gain by creating a new product and taking a risk.

These six values make up the free enterprise system. Few restrictions are placed on individuals and companies, allowing them more opportunities for advancement.

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Four Stages of Circular Flow

To make this concept easier to understand, it is assumed that the only two sectors in the economy are households and firms. The households own all factors of production.

1. The households sell their factors of production (land, labor, and capital) to firms.

2. The firms pay the households wages, rent, profit and interest on capital.

3. Consumers spend money on the goods and/or services produced by the firms.

4. For their money, consumers acquire goods and services.

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Two Types of Price Elasticity

1. Price elasticity of demand: This is a type of elasticity measurement that measures the change in the percentage of how much of a product is bought if the price of the product changes. The formula used for finding this statistic is the percentage change in products bought divided by the change in price. The coefficient is almost always negative, because prices are usually increasing, and people will buy less as a result.

2. Price elasticity of supply: This is a type of elasticity measurement is similar to the elasticity of demand, except it measures how quantity demand changes in response to a change in price.

Four Major Types of Business

1. Sole proprietorship: This is the simplest kind of business. A single person can start a business this way by registering their name and obtaining local business licences. A sole proprietorship is not a separate legal entity. Because the person is singularly responsible for the company, they are also responsible for any debt that may be incurred.

2. The partnership: A type of business in which two people work together in order to secure a profit. Partnerships can be formed informally or formally with partnership agreements. Both partners are responsible for any debt, losses, or liabilities.

3. The limited liability company: This kind of business is a mixture of the corporation business model and the partnership business model. More liability protection is offered, like a corporation. This business model is similar to a partnership in its simplicity.

4. The corporation: The corporation is the most complicated form of business. A corporation is not owned by a person or two people, but by a number of shareholders. These shareholders may sell their stock at anytime to new shareholders, meaning that the owners of the corporation constantly changes. A board of directors overlook the shareholders, and officers are usually nominated by the board of directors. Because corporations are more complicated, their are more rules and regulations for operating one.

Six Categories of Inflation

1. Inflation on coverage: This category includes comprehensive inflation, when the price of all goods and services rises throughout a particular economy, and sporadic inflation, when only some goods and services rise in price throughout certain regions.

2. Inflation on time of occurrence: Inflation depending on whether the country is currently at war, post-war, or in peace time.

3. Inflation on government reaction: Inflation rates can change based on the governments involvement in the economy. Inflation can occur when little government regulation is in place and when the government is actively trying to regulate inflation.

4. Inflation on rising prices: Inflation can be categorized by the rate at which it is occurring. Inflation rates range from creeping inflation to hyperinflation.

5. Inflation on causes: Inflation can be a result of another factor. A few examples of this type of inflation include credit inflation, in which there is an excess of credit in the economy, wage inflation, when wages increase but the amount of products produced does not, and development inflation, inflation caused by developments occurring in the economy.

6. Inflation on expectation: Inflation that is based on what people predict about inflation. If the people's predictions are correct, it is known as anticipated inflation. If the actual inflation is not what what was predicted, it is known as unanticipated inflation.

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Two Types of Federal Fiscal Policy

1. Fiscal Policy: Fiscal policy is set by the national government. The government spends money so as to influence the economy on a larger scale. Fiscal policies include changing tax rates, interest rates, and the amount the government spends. The main goals of most fiscal policy is to create price stability, lower the unemployment rate, and stabalize the economy.

2. Monetary Policy: Monetary policy is set by a central bank. The central bank controls the money supply, which in turn affects interest rates. In the United States, the Federal Reserve controls the money supply.

Changes in International Economics

The current global economy looks very different than it did decades ago. The world is much more connected now as a result of email and cellphones. Trades and business can be done in real time, instead of having to wait a long time for transactions to be completed. As different means of communication enabled more people to become connected, the economy also became more connected. What was being traded between countries also changed. In the early 2000's, services and manufactured goods were traded more frequently, while agricultural goods were traded less frequently. The Tariff rates have in general decreased, making it cheaper to export and import goods and services between various countries. Because Tariffs are lower, the products are cheaper, so more people can buy them.
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