Three Major Tasks of Economics
Economics is a social science dealing with the way people's spending habits change during certain conditions. This has evolved over the years to political economics, or macroeconomics, which are ways of maintaining a healthy and stable environment for businesses to operate and for people to live and work. Although there are hundreds of factors economists look at to study and affect, there are three which are more important than the others.
Other People Are Reading
-
Unemployment
-
This is a measurement of how many people at one time are claiming benefits while not working a job. Governments aim to keep this number as low as possible since the more people there are working, the less money is paid out. This figure is calculated simply by adding up the number of people out of work over a certain period of time, usually three months. Certain people are sometimes not counted. These groups include students over the age of 18 who are still in education and the disabled who are unable to work.
Interest Rates
-
Interest rates affect both loans and savings. They are a percentage term relating to how much extra you have to pay back on a loan or how much is added to your savings. This rate is usually controlled by a central bank. Low interest rates are good for encouraging business investment; the company can pay back less on a loan. High interest rates are good for encouraging people to save and stopping the economy from overheating. Overheating is when a period of strong economic growth leads to rapidly increasing prices, otherwise called inflation. An economy can only cope with moderate long-term growth; if it is too long and too fast, its infrastructure cannot handle the increased pressure.
-
Inflation
-
Inflation is a percentage term expressing how much the average basket of goods has gone up in price over the past year. The average basket of goods measured includes food, clothes, transport and sometimes mortgage repayments. It is calculated by taking a broad cross-section of people's buying habits. A certain level of inflation is always going to occur; it is important this level does not get out of control since wages will not be able to keep up in real terms. There is no surefire way to halt or increase inflation, but it is still one of the most important economic factors to be monitored. Most governments try to keep inflation to around two percent, although a lot of countries fail at this goal. Zimbabwe, for example, suffered from inflation rates of over 1 million percent in 2008. At this time, shops in Zimbabwe that actually had supplies were updating their prices by the hour.
Other Factors
-
Unemployment, interest rates and inflation are the most widely reported and discussed economic factors as they directly affect people's lives, but economists monitor and study other factors as well. These include imported versus exported goods, gross national product and currency exchange rates.
-
