It studies how individuals, businesses, governments and nations make choices on allocating resources to satisfy their wants and needs, and tries to determine how these groups should organize and coordinate efforts to achieve maximum output. Economic analysis often progresses through deductive processes, much like mathematical logic, where the implications of specific human activities are considered in a "means-ends" framework. Economics can generally be broken down into macroeconomicswhich concentrates on the behavior of the aggregate economyand microeconomicswhich focuses on individual consumers. The principle and problem of economics is that human beings occupy a world of unlimited wants and limited means. For this reason, the concepts of efficiency economics productivity are held paramount by economists. Increased productivity and a more efficient use of resources, they argue, could lead to a higher standard of living. Despite this view, economics has been pejoratively known as the "dismal science," a term coined by by Scottish historian Thomas Carlyle in He may have written it to describe the gloomy predictions by Thomas Robert Malthus that population growth would always outstrip the food supply, though some sources suggest Carlyle was actually targeting economist John Stuart Mill and his liberal views on race and social equality. There are also schools of economic thought. Two of the most common are C lassical and Keynesian. Since true experiments cannot be created in economics, empirical economists rely on simplifying assumptions and retroactive data analysis. However, some economists argue economics is not well suited to empirical testing, and that such methods often generate incorrect or inconsistent answers. The building blocks of economics are the studies of labor and trade. Since there are many possible applications of human labor and many different ways to acquire resources, it is difficult to determine which methods yield the best results in equilibrium. Economics demonstrates, for example, that it is more efficient for individuals or companies to specialize in specific types of labor and then trade for their other needs or wants, rather than trying to produce everything they need or want on their own. It also demonstrates trade is most efficient when coordinated through a medium of exchangeor money. In focusing on labor, economics focuses on the action of human beings. But of course, human behavior can be unpredictable or inconsistent, and based on personal, subjective values another reason why economic theories often are not well suited to empirical testing. As it is, economic laws tend to be very general, and formulated by studying human incentives: Economics can say profits incentivize new competitors to enter a market, for example, or that taxes disincentivize spending. Economic indicators are reports that detail a country's economic performance in a specific area. These reports are usually published periodically by governmental agencies or private organizations, and they often have a considerable effect on stockfixed incomeand forex markets when they are released. Gross Domestic Product GDP The Gross Domestic Product GDP is considered by forex to be the broadest measure of a country's economic performance. It represents the total market value of all finished goods and services produced in a country in a given year or other period the Bureau of Economic Analysis also issues economics report monthly during the latter end of the month. Many investors, analysts and traders don't actually focus on the final annual GDP report, but rather on the two reports issued a few months before: This is because the final GDP figure is frequently considered a lagging indicatormeaning it can confirm a trend but it can't predict a trend. In comparison to the stock market, the GDP report is somewhat similar to the income statement a public company reports at year-end. Retail Sales Reported by the Department of Commerce during the middle of each month, the retail sales is a very closely watched report that measures the total receipts, or dollar value, of all merchandise sold stores. The report estimates the total merchandise sold by taking sample data from retailers across the country. This figure serves as a proxy of consumer spending levels. Because consumer spending represents more than two-thirds of the economy, this report is very useful to gage the economy's general direction. Also, because the report's data is based on the previous month sales, it is a timely indicator. The content in the retail sales report can cause above normal volatility in the market, and information in the report can also be used to gage inflationary pressures that affect Fed rates. Industrial Production The industrial production report, released monthly by the Federal Reservereports on the changes in the production of factories, mines and utilities in the U. One of the closely watched measures included in this report is the capacity utilization ratiowhich estimates the level of production activity in the economy. It is preferable for a country to see increasing values of production and capacity utilization at high levels. Employment Data The Bureau of Labor Statistics BLS releases employment data in a report called the non-farm payrollson the first Friday of each month. Generally, sharp increases in employment indicate prosperous economic growth. Likewise, potential contractions may be imminent if significant decreases occur. While these are general trends, it is important to consider the current position forex the economy. For example, strong employment data could cause a currency to appreciate if the country has recently been through economic troubles, because the growth could be a sign of economic health and recovery. Conversely, in an overheated economy, high employment can also lead to inflation, which in this situation could move the currency downward. Consumer Price Index CPI The Consumer Price Index CPIalso issued by the BLS, measures the level of retail price changes the costs that consumers pay and is the benchmark for measuring inflation. Using a basket that is representative of the goods and services in the economy, the CPI compares the price changes month after month and year after year. This report is one of the more important economic indicators available, and its release can increase volatility in equity, fixed income, and forex markets. Greater-than-expected price increases are considered a sign of inflation, which will likely cause the underlying currency to depreciate. Dictionary Term Of The Day. A period of time in which all factors of production and costs are variable. Latest Videos PeerStreet Offers New Way to Bet on Housing New to Buying Bitcoin? This Mistake Could Cost You Guides Stock Basics Economics Basics Options Basics Exam Prep Forex 7 Exam CFA Level 1 Series 65 Exam. Sophisticated content for financial advisors around investment strategies, industry trends, and advisor education. Economic Indicator Economy Economic Conditions Microeconomics Gross Domestic Product - GDP Economic Growth Rate Economic Growth Economic Efficiency Business Economics. 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Imports, Exports, and Exchange Rates: Crash Course Economics #15
Imports, Exports, and Exchange Rates: Crash Course Economics #15
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APA recently asked Pargament the following questions about the psychology of religion and spirituality.