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Key Variables in the Economy - Coggle Diagram
Key Variables in the Economy
Production Growth
Productivity is the quantity of goods and services produced from each unit of labor input.
A country's standard of living depends on its ability to produce goods and services.
Ways Productivity is determined.
Natural resources are the inputs into the production of goods and services that are provided by nature, such as land, rivers, and mineral deposits.
Human capital is the knowledge and skills that workers acquire through education, training, and experience.
Physical capital is the stock of equipment and structures that are used to produce goods and services.
Technological knowledge is a society's understanding of the best ways to produce goods and services.
Productivity is very important for an economy because it shows how that economy is growing and how it compares to other economies. However, it is also an important concept for everyday life. If we are not very productive, we will not get all the things done that we need to. Also, if a business is not productive, they will not be able to make a lot of goods or provide many services.
Investing
Loanable funds refer to all income that people have chosen to save and lend out, rather than use for their own consumption. It also refers to the amount that investors have chosen to borrow to fund new investment projects.
Reasons for investing.
On occasion, Congress institutes investment tax credits. This gives firms an advantage when they are building a new factory or buying a new piece of equipment.
This reform of the tax laws encourages greater investment and the result of that would be higher interest rates and greater saving.
Investing allows you to get more goods in the future.
Investing refers to the purchase of new capital (goods), such as equipment or buildings, that will be used in the future to purchase new goods or capital.
Economies can also invest in foreigners or foreign goods. This can help them to get resources that they do not have access to.
Investing is important for businesses and individuals alike. In my own life, I have not really invested in anything. However, I know how important it is and plan on doing it in the future. For businesses, they need to invest so that they can get better goods and services.
Savings
Private saving is the income that households have left after paying for taxes and consumption.
National saving (or just saving) is the total income in an economy that remains after paying for consumption and government purchases.
Public saving is the tax revenue that the government has left after paying for its spending.
A budget deficit is a shortfall of tax revenue from government spending.
A budget surplus is an excess of tax revenue over government spending.
Reasons for saving.
For a society to produce or invest more in capital, it must consume less and save more of its current income.
Saving is an important long-term determinant of a nation's productivity.
If a society can raise its saving rate, then more resources would be available for capital accumulation, GDP would grow more rapidly, and citizens would eventually enjoy a higher standard of living.
Despite the many reasons to save, there are certain tax laws that make people not want to save. The reason for this is because it changes how much money you can make while saving and people see it as a loss instead of a gain.
I personally do not have a ton of experience with saving. I have never had a savings account. However, I do save most of my money because I want to eventually buy a car. Also, I know how important it is for a business to save. If a company cannot save, they will not be able to buy more expensive equipment. Plus, being able to show that you can save money can help you to show that you are trustworthy and able to do more.
Unemployment
The labor force is not made up of everyone. It is only comprised of the adult population that can work.
To understand unemployment, it must be known how it is measured. To measure it, we must first look at the labor force (total number of workers). Then, we must divide that number by the amount of people that are currently not working. Finally, that number is timed by 100. The end result is the unemployment rate.
There is a natural rate of unemployment because not everyone that can work does. However, there is also a cyclical unemployment rate that is a major deviation from the natural rate.
Reasons for unemployment.
There are discouraged workers that are individuals who would like to work but have given up looking for a job.
There is frictional unemployment that is unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills.
There is structural unemployment that is unemployment that results because the number of jobs available in some labor markets is insufficient to provide a job for everyone who wants one.
Searching for a job takes time because people have preferences and want certain jobs.
Wages is also a big factor when it comes to not getting a job. People do not want to settle for a job that will not pay them enough.
The government realizes that not everyone is unemployed on purpose. So, they have made a form of insurance that partially protects workers' incomes when they become unemployed.
There are also unions that are supposed to help keep people from becoming unemployed. They allow for employees to have a voice when it comes to working conditions and wage amounts. However, there are also people against unions because they say that they make it where people will not work unless they get above minimum wage.
Unemployment is a normal and natural part of an economy that is affected by many factors. Thankfully, it is not something that I have had to deal with. However, it can affect businesses quit a lot and even cause them to fail if they cannot get enough employees. So, they have to be sure to offer safe working conditions and appropriate wages.