Money Is The Building Blocks Of The Economy Essay

Money Is The Building Blocks Of The Economy Essay

Length: 801 words (2.3 double-spaced pages)

Rating: Better Essays

Open Document

Essay Preview

If the money is the building blocks of the economy; then the interest rate is the price of those building blocks. The interest rate is the cost, the firms, and the individuals, will have to pay for the use of the money, the price is expressed as a percentage of the amount borrowed.
Subsequently, how much truth is in the statement that,
“One’s income determines the amount one saves, but the interest rate determines how it is saved”.
There are several factors that determine from economical point of view, what might incline people and firms, to save money instead of spending them; some of them are:

• Demand for money
• Disposable Personal Income
• Propensity to Consume
• Consumer Confidence Index
• Interest Rates

The consumer’s Disposable Personal Income; which in simple terms is our after-taxes money, will determine to some degree, how much one is willing to save, and most definitely how much one is able to save.

The Propensity to Consume in economics, is the ratio of total consumption to the total income; in other words how much of their income the consumer will rather spend than save. The Propensity to Consume might be influenced by many factors; one of which, could be the interest rates.
Furthermore, the Demand for Money, which is the relationship between the quantity of money, that people want to hold, and some factors that might determine the quantity, dictates to a certain degree how much people save, and if they do save at all.
In addition, the Consumer Confidence Index is known to be a crucial factor, determining whether there is demand for money or not; people tend to save more during recessionary gaps, expecting tough times ahead. Likewise, people tend to save less when the economy operates at its optimal state, ...

... middle of paper ... market,

and other financial assets might definitely shift the demand one way or the other.
Transfer cost is the cost the consumer pays for transferring the money between money and non-money deposits; for instance transferring money between a checking account, and non-money deposit such as bonds might incur certain fees which will determine the profitability of such transfer. Lower transfer fees usually lower the demand for money.
Preferences certainly play a role in demand for money; for the reason that people’s attitudes toward risk and yield, will determine to some degree how much cash will they hold.
To conclude, I would like to emphasize, that the changes in the demand for money, are closely related to the changes in the bond market; as the interest rates determined in the bond market, are consistent with the interest rates in the money market.

Need Writing Help?

Get feedback on grammar, clarity, concision and logic instantly.

Check your paper »

Building Blocks of International System Essay

- There is no question that states used to be the building blocks of the international system in the past because they had the sovereignty in the political, security, and social areas. However, with globalization, states are subjected to external influences and it is becoming questionable if states are still the fundamental actors of the international system. Cooperation is becoming a key motivation in the international system nowadays. ()This implies that states may have to sacrifice their policies to maintain universal standards of living or the international peace....   [tags: Politics, Security, Social Areas, International]

Better Essays
1370 words (3.9 pages)

Essay about Money Has Its Own Value Depending On Who You Are Talking

- Money has its own value depending on who you are talking to. In today’s economy money is an essential tool for everyone to become successful and have financial stability. Money can accomplish many things such as paying for your child’s college tuition, paying payments for your new car, or buying a house. It is crucial in today 's world to be financially stable. As a parent we all want our children to be much more successful than we were. In order to do so, we must leave our children with acceptable financial security....   [tags: Investment, Debt, Money, Finance]

Better Essays
889 words (2.5 pages)

Money and the Recovery of Renaissance Florence Essay

- Supply and demand for goods play a critical role throughout world economies. They are perhaps the primary building blocks of any economy. Several hundred years ago, supply and demand were no less important, and were particularly instrumental in the economic recovery of Florence during the fifteenth and sixteenth centuries. The ability of a group of notable people to provide the supply of goods in response to demand in Florence provided the foundation for the flourishing of art, commerce, and living standards....   [tags: Economics]

Better Essays
2529 words (7.2 pages)

Balancing Money and the Economy Essay

- The nature and necessity of money is one singular fact that responds to every thing in nature. It holds together the very essence of our beloved intricate nature, every local, regional or international issue of any significance could have been handled differently could there have been more or less of this money. The money factor has taken the centre stage of every heart beat of each and every agenda and it predetermines and dictates our very existence. Our relationships with most of what we seek identity with, whether object or human, is best defined by our relationship with this paper currency....   [tags: money, economy, ]

Better Essays
1326 words (3.8 pages)

The Negative Effects of an Economy Starving for More Money Essay

- Are the people living now happier than those who grew up in the past. Our money system relies on a constant increase in money circulation. The everyday needs were met in the seventies just like they are now. The only difference now is that everything people want or need is reached on a much larger scale because our economy is always trying to keep up with the debt. When the flow of money slows down the banks crave a new alternative to quench its never ending thirst for more. The people are the ones who have to meet the quota or they will suffer....   [tags: Banks, Money, Economy]

Better Essays
861 words (2.5 pages)

Essay on Theoretic Models for Tourist Experience Design

- The promotion of local economic development processes in a metropolitan area often depends on its ability to attract sustainable tourism flows and to provide a high quality of life for citizens. Both are basic conditions to enhance the competitiveness of an urban context, but are possible only if territorial planning strategies are focused on the real "experience" lived by tourists and citizens while they get in touch (either virtually or physically) with that place. This is the reason why all the choices made by policy makers, urban planners, and territorial marketing managers should be aimed at promoting the best experience possible for people visiting and living the city....   [tags: planning, economy, strategies]

Better Essays
1524 words (4.4 pages)

Building Blocks Of A Home Based Business Essay

- Before creating a business plan, before choosing a product, before developing a marketing technique you need to consider the basic building blocks of a home based business: goals. These are the designated targets that you aim for with the intent of developing a work from home enterprise. The objectives that are achieved will help build the success that you are searching for. The basics for setting a goal are an open secret known with top-caliber athletes, successful business people and internet entrepreneurs....   [tags: Management, Goal, Term, Entrepreneurship]

Better Essays
787 words (2.2 pages)

The building blocks of a tragic hero Essay

- Imperfection, manipulation and ignorance are the perfect ingredients for creating a tragic hero. A great example of a person displaying these traits would be no other than Othello, from William Shakespeare’s play “Othello”. Throughout the play, Othello is manipulated and as a result he becomes extremely jealous and angry with the ones he loves. Othello is easily manipulated by the conversations between Iago and himself. Othello’s tragedy is caused because of personal flaws, and misguided trust in others, which is evident as his dialect, and behaviours change throughout the play....   [tags: Shakespeare, Othello]

Better Essays
959 words (2.7 pages)

The Fundamental Building Blocks Of Society Essays

- Norms are like the guidelines for how people should act in society because they are the fundamental building blocks of society. It facilitates collective action problems and helps society get along. Conflict begins when two people have a disagreement on the understanding of those norms. The two people, or the dyad, can either settle it on their own or select a third party to solve the problem. The third party adds to the dyad making it a Triad. Usually a judge will be the third party and he/she will continue on with the dispute resolution....   [tags: Law, Common law, Roman law, Civil law]

Better Essays
1613 words (4.6 pages)

Essay on Building blocks

- Building blocks Building Blocks of a Family The short story "Teenage Wasteland" by Anne Tyler is a revealing story about the trials of a mother and her son. Donny is what is known as a problem child, and Daisy cannot to seem to figure out what his problem is. Through many attempts she tries to reach to him through counselors, and outside help. This story reveals a lack of communication, feelings of inadequacy, and lack of parental control. Daisy reminisces on what Donny used to look like....   [tags: essays papers]

Better Essays
846 words (2.4 pages)