What Impacts the Economy?

  • What Impacts the Economy?

    Most people have a hard time recalling what they have learned in economics during their undergraduate years. But many may remember how complicated the subject can be. Every country’s economy has a healthy dose of supply and demand. Supply and demand have an interesting and ongoing relationship. Supply is the availability of a particular good and services in any particular time. Demand on the other hand represents a way to measure consumer desire and spending on a particular good and specified price. This is one of the fundamental concept of economics. Prices is the reflection, and the point in which supply and demand intersect is said to be at equilibrium. Consumers create demand and companies’ studies consumer behavior. Supply impacts the country’s productivity potential. A country’s success in the short run will be determined by inflation, interest rates, consumer spending, and business confidence. In the long run however, the success depends on the right mix of people, population, money, investments, business capitals, and knowledge and ideas. Money and knowledge would result to productive workers and productive workers brings about economic growth. A country’s growth is determined by two components:


    Population or number of workers. Population will determine how many workers a country may have. Population can be affected by things such as low birth rate, fertility rate, how long people live, how long they work or retire and the aging population. Obviously policy can impact population and population impacts economic growth. However, a large population does not always make some country rich but more of the productivity.

    • Productivity or output by worker. This determines how much each worker earns. Potential output is how much a country can produce with its existing labor force. And the rate of growth overtime is potential growth.
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