A Study Of Money, Capital, Banking, Wealth, Production And Consumption Of Goods

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The study of money, capital, banking, wealth, production and consumption of goods, science of choice and the analysis of movement in the overall economy- trends in output, prices and unemployment is called economics. Economics is further divided into two main parts- micro and macroeconomics , where “macro” means big and “micro” small. A major distinction is made between macroeconomics, which studies the economy as a whole- such as national income, gross domestic product (GDP), overall inflation and unemployment rates, balance of payment and exchange rate and so on – and also it examines economic relations of a country with the rest of the world. In other words, macroeconomics takes a much wider view by analysing performance of the economic activity of a whole country or the international marketplace. And microeconomics which studies processes, facts, acts and behaviour of individual participants, such as industries , firms and households in economic activity. Its purpose is to explain the formation of prices in different markets seen in the economy, determining the balance between goods and services. While these 2 studies of economics appear to be different, they are actually interdependent and complement one another, because a macroeconomic process consists of a series of microeconomic processes (Sloman & Garrat, 2013). Both macro and microeconomics should be studied together in order to understand how companies operate and earn revenues, how an entire economy is managed and sustained. 2.2 Equilibrium in the economy Equilibrium means a position of stability. In macroeconomics , equilibrium in the economy will occur when the aggregate planned demand for goods and services equals the aggregate supply of these products (Gillespie, 2... ... middle of paper ... ... preferred, it could take to a period of recession, which in economic cycles usually follows the period of economic boom, characterized by excessive spending. Such a period of excess demand might lead to inflation, which is a factor that constantly affects a country or region, whether positive or negative. If an economy is growing too fast , in this case policy-makers may search for to reduce the excessive demand for goods and services by increasing interest rates, which means of making money harder to come, because borrowing is more expensive. If the rising level of GDP will be monitored, this should help to control inflation , because the effect should decrease the demand for good and services. However, gross domestic product data are not perfect measures of the quality of life in a country, but it is still useful in measuring the standard of living (Buck, 2008) .

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