ECONOMIC MAGNET
The economic system works like a simple machine with a pivot (money) around which it revolves. To appreciate the functioning of the economy, one needs to analyze the behavior of each economic agent or individual. Understanding of each individual decision making process is essential in unravelling the mystery surrounding the success or failure of an economy.
Adam smith in his famous book “the wealth of nations” opines that if every individual is allowed to maximize his own selfish interest, the interest of the society as a whole will be maximized. This assertion will come to dominate the classical thinking for centuries. The micro interest of society are aggregated at the macro level to reflect the collective welfare of the …show more content…
The rate of growth, development or otherwise depends on the direction, pattern and composition of the economic …show more content…
The expenditure by one individual automatically becomes the income of another. Hence every act of transaction create income and expenditure When the total value of transaction are divided by the number of units of goods and services we get the price. This basic mechanism of flow of income and expenditure determines the rate of economic progress of a nation.
With a closed economy, without any external linkages or injections in the form of export and imports. The economy expands by increasing the level of productivity.
With such an economy, the level of income is influenced by the level of productivity. Increase in the level of productivity of goods and services increases expenditure and hence income.
In modern economy, the economic system is influenced by innumerable factors notable among them are the rate of credit and volume of external trade.
Credit; whatever be the source, form or means play a crucial role in the functioning of the economy. When credit is created the purchasing power of the debtor increases. Credit increase the demand for durable and non-durable goods by households. Credit to firms increases demand for investment goods and facilitate business expansions. Credit to government increases government expenditure on public infrastructure and other welfare service
The economic system works like a simple machine with a pivot (money) around which it revolves. To appreciate the functioning of the economy, one needs to analyze the behavior of each economic agent or individual. Understanding of each individual decision making process is essential in unravelling the mystery surrounding the success or failure of an economy.
Adam smith in his famous book “the wealth of nations” opines that if every individual is allowed to maximize his own selfish interest, the interest of the society as a whole will be maximized. This assertion will come to dominate the classical thinking for centuries. The micro interest of society are aggregated at the macro level to reflect the collective welfare of the …show more content…
The rate of growth, development or otherwise depends on the direction, pattern and composition of the economic …show more content…
The expenditure by one individual automatically becomes the income of another. Hence every act of transaction create income and expenditure When the total value of transaction are divided by the number of units of goods and services we get the price. This basic mechanism of flow of income and expenditure determines the rate of economic progress of a nation.
With a closed economy, without any external linkages or injections in the form of export and imports. The economy expands by increasing the level of productivity.
With such an economy, the level of income is influenced by the level of productivity. Increase in the level of productivity of goods and services increases expenditure and hence income.
In modern economy, the economic system is influenced by innumerable factors notable among them are the rate of credit and volume of external trade.
Credit; whatever be the source, form or means play a crucial role in the functioning of the economy. When credit is created the purchasing power of the debtor increases. Credit increase the demand for durable and non-durable goods by households. Credit to firms increases demand for investment goods and facilitate business expansions. Credit to government increases government expenditure on public infrastructure and other welfare service