What is economics? Why should you care about it? How does studying this field relate to your everyday life? These are all very important questions, which we will attempt to address in this article!
First off, what is economics? This is an easy question to answer because there is already a definition of it. According to Wikipedia, “Economics is the study of how people use resources to achieve their goals.”
This seems pretty clear cut and straightforward, but some may argue that this definition leaves out something significant. They may say that it misses the importance of money, or the importance of society as a whole.
To be completely accurate, this definition left out two major components of economic theory. However, these concepts play crucial roles in our lives every day, so making them part of the equation makes sense.
The first concept that gets left out of the definition is motivation. As mentioned before, one of the main parts of economics is understanding why people choose to spend their money or invest in things.
If you want to buy a new shirt, then why are you spending your hard earned cash on that particular brand versus another brand? When you are investing in something, like buying a house, why do you feel compelled to do business with only sellers within your community rather than going outside of your circle?
These types of motivations can be influenced by things such as friendship, prestige, and profit, just to name a few.
Definition of economics
What is economics? This question seems simple enough, but it can be tricky to pin down. Most people have some sort of idea about what economics is, but they are usually wrong! The word itself comes from the Greek word oikonomia, which means “the house-management” or “domestic economy.”
The term was used in this way by ancient Greeks such as Aristotle and his student Plato. According to Aristotle, the purpose of economic activity is to satisfy human needs and desires through the production and distribution of goods and services.
Plato expanded on this slightly more by adding the importance of knowledge and wisdom to the field. He also discussed how important it was for individuals to live according to moral principles so that they could maintain control over their own lives and the lives of others.
Economics as we know it today wasn’t always the case. Before capitalism there were no private businesses, only state run monopolies or big business cartels. In these cases, only one company had access to resources and necessities like food, water, and shelter.
It is our current system of free enterprise where companies and entrepreneurs are allowed to produce goods and distribute them freely that makes sense of the field. This allows for competition, innovation, and productivity while still meeting essential human needs.
What is the economy?
We often talk about the "economy" as if it were one thing, but there are actually several different definitions. When we refer to the "economic system," what we mean is our current state of affairs- where people work for corporations that exploit them by paying only enough to keep them working under a thin veneer of human dignity, or where individuals rely on credit cards to fulfill their spending habits.
This is the very essence of capitalism, after all - using resources (money) to get more resources (happiness). The term "capitalist" was originally used to describe someone who made money through this exploitation, which is why some people associate capitalists with rich people now.
However, early economists didn't see things that way. Karl Marx defined the "mode of production" in his book Das Kapital (Capitalism) as something where workers are exploited by the few wealthy owners of the means of production. He called these people capitalist because they make profit off of the labor of others.
Other economic systems don't have this element of exploiting laborers, however. Some use trade instead, whereas others use gift economies like those found in the Amazonian jungle.
Factors that influence the economy
There are several factors that affect our daily lives, not just in terms of what we buy but how well or poorly an economy is doing as a whole. These include things like whether there is enough money to spend on food, clothing, shelter, health care, education, and so on; whether people have access to these goods; and whether they can afford them.
When changes occur in any one of these areas, it has an effect on the others. For example, if people start spending more because they have extra cash, then they will likely have better diets, for instance. Or if there’s plenty of food available, then people won’t need to shop as much for it. And overall, this helps the economy.
A healthy economy requires all parts working together, and when you take away some pieces, everything falls apart.
What is a recession?
Sometimes, even after we have entered an economic expansion period, people will say that we are in a recession. This can sometimes be confusing as what defines a recession differs from person to person.
A recession is defined by the U.S. Federal Government as two consecutive quarters of negative GDP growth. Some experts also include a requirement for unemployment to rise above 5%.
When talking about GDP, this definition becomes tricky. Because it is dependent on how companies measure their spending, there is not one clear way to define a recession. Businesses may choose to defer purchases or reduce investment, so when they combine all their spending it does not show up as positive GDP growth.
This makes defining a recession difficult because you need to look at both past trends and present situation to determine if a downturn has occurred. Also, some countries do not publish yearly statistics for GDP, making it more challenging to know if a downturn has happened before.
Definition of a recession
A recession is defined as two or more consecutive quarters of negative GDP growth. This definition assumes that when we add up all the ways to measure how much money was made in the economy, there will be some months where the economies are not making enough money to cover those costs.
When this happens, we say that the economy is shrinking!
These losses typically occur because people do not spend money as quickly (recessionary behavior), companies cut back on production (we’ve already mentioned why before!), and you can also lose track of spending by individuals who have savings so they stop buying things and investing in new projects.
In fact, according at what data we have, it takes on average five years for our economies to fully bounce back from a significant downturn.
What is inflation?
When prices rise, that’s called price inflation. It happens when something in the economy becomes more expensive than it should be. This can happen due to several different factors including going up faster than what you would expect given how much money there is, people spending more money because they have more money, or companies producing more of a good so supply goes down and demand stays about the same.
Inflation can sometimes cause some short term worries. People often refer to an increase in inflation as rising “cost-of-living pressures.” These cost-of-living pressures usually feel like they are coming from all directions – not just at the grocery store, but also with respect to health care, education, and technology.
However, even though these may add to someone’s overall budget burden, they don’t translate into higher average income levels. The reason for this is simple: most things we buy aren’t perked up by having more cash. For example, food and shelter make up half of every person’s monthly expenditures, so if their budgets stay the same, they’ll still get enough of both to satisfy their needs.
While costs do go up across the board, this doesn’t mean everyone has to pay more for everything they want or need — which is why many economists consider low rates of inflation to be neutral or even positive.
Definition of inflation
When inflation occurs, it is when rising prices are seen. This seems very straightforward, but there is some nuance to how we define price rises as being inflationary.
The most common way to measure inflation is by looking at how much more expensive things are than what they were like years earlier. For example, if you go shopping today for one item, say a pair of jeans, then compare that with what similar items cost a year ago, people will tell you whether or not the market is getting more expensive fast.
If you look back even just two years ago, buying a pair of jeans was a lot cheaper! Therefore, anyone who purchases a pair of jeans these days would consider the markets to be becoming increasingly expensive. That is why people refer to such goods as “inflationary” – because they feel that prices are going up faster than what people had paid before.
However, this isn’t the only way to determine if something is experiencing inflation. There are other factors to take into account when measuring the speed at which costs rise. These include things like how much money people have in their economy, how well their spending habits work in comparison to previous years, etc.
This can get tricky because sometimes while an item may seem expensive now compared to past times, it could be due to the fact that people actually spend less money per person now than they did back then.
What is a depression?
A recession is when more people are unemployed than normal, while there is still plenty of money to be made and spent. The word “depression” is sometimes used to describe this kind of situation, but it really doesn't make much sense!
When we use the term "depression", what we mean is that things are not as good as they could or should be. We call these kinds of situations suffering periods, because even though life may seem very hard at times, there are usually improvements every day.
A depression is different because there is no clear improvement each day. Some days are better than others, but overall, things get worse instead of getting better. This is why most experts don't agree about how to define a depression.
Some say that a depression happens when your happiness level drops below a certain threshold for longer than two weeks. If you're in a bad mood almost all the time then this threshold has been crossed, so they say that you have a depressive episode.
However, some think that a person who experiences frequent sad thoughts that keep going through their mind for longer than one week have a mental health problem, which is called major depressive disorder (MDD).
This article will focus on whether having an anxiety-related condition makes it harder to know if you have a depressive illness or not.