BANKING AND MONEY

BANKING AND MONEY

  The Bank is closely related to the flow of money into and about the economy. Often working with the government in the effort to stabilize the economy and to prevent inflation. They specialize in the business is in providing capital, and in allot funds to the credit. The Bank started as a place to which people take their valuable to be trusted, but now the world's major banks has many functions in addition to acting as guardians of valuable personal property.

  Banks normally receive money from their customers in two formats areas: the current account, and deposit account. So now a customer can issue a personal check. No interest paid by banks on account of this type. With a deposit account, however, customers do to leave her money. Banks in turn lend money to customers who require a deposit of capital. It's got flowers for the bank, and interest is almost always at a level higher than the rates of any bank that pays interest to its depositors. In this way the bank makes its main profits.

What is Demand

What is Demand

     Theorists are simplifiers. Their job is the elimination of complexities and detail so that we can understand what really matters. They often make assumption. They do this simplify the situation. For example, the elementary theory of aggregate demand assumes that prices and international trade are the "flesh". We can add them later to the "bones" of demand theory.

     There are four "bones" in the theory. Two are in the goods market. They are consumption and investment. Together consumption and invesment are equal to total demand. Two "bones" are in the money market. (Demand manifests it self through money people need money to buy goods). There are two kinds of demand for money. They are transaction and speculation.

     Economists use these four ideas to explain familiar questions. What are some of these questions ? Here is in example : what happens if goverments reduce income taxes ? Theory doesn't answer these questions, but it lets us discuss them in a common languange.

     Let's start with good market. What determines consumption and investment ? Consumption and income are related. As income increases, so does consumption. Economists can define and measure consumption, but the meaning of "income" is less clear. people do not always spend according to their income in a particular. Income is a long term idea. It may extend over a person's lifetime. People change spending patterns id they think their income has changed in a permanent way.

     Investment is a more dificult idea. Several different factors determine it. The most important is interest rates. If interest rate rise, companies may not hold as much inventory. They may put their money into a bank. In a bank, the money will earn interest income. The companies may decide to cancel projects that need capital.

What is Economics

What is Economics

     Alfred Mrshall's definition : Economics is a study of mankind and the ordinary business of life. Because economic problems have certain common features, one may arrive at more penetrating definition. The problems of economics arise out of the use of scarce resources to satisfy unlimited human wants. Scarcity is inevitable and is central to economic problems.

     A society's resources consist of the free gifts of nature, such as land, forest, and mineral, human resources, both mental and physical, and all sorts of man-made aids to further production, such as tools, machinery and buildings. Economicsts call such resources factors of production because they are used to produce those things that people desire. The things produced are called commodities. Commodities may be divided into goods and services.

     Goods and services are the means by which people seek to satisfy some of their wants. The act of  making goods and services is called production, and the act of using them satisfy want is called consumption. For most people in most societies good are not regarded and desirable in themselves, few people want to pile them up endlessly in warehouse, never to be consumed. They are value because people want the services they provide. An automobile, for example, helps to satisfy its owner's desires for transportation, mobility, and possibly status.