Economics

The words economy and economics are often used interchangeably, but they have distinct meanings. While both are interrelated and essential to understanding how societies function, they serve different purposes. The economy refers to the actual system of production, distribution, and consumption of goods and services within a country or region. Economics, on the other hand, is the study of these systems, analyzing their functioning, efficiency, and impact on human life.

Some government intervention occurs in the American economy, but generally the marketplace answers the three basic economic questions of what, how, and for whom goods and services should be produced. In command (controlled) economies, however, the government (and not the market) answers these three basic questions. Read on to learn about the major alternative to market capitalism

The word demand has a special meaning in economics. Most American teenagers own a pair of sneakers. Because of high demand and high price, however, not everyone who wants a pair of Nike Air Force 1 sneakers is able to acquire this particular brand. As you read this section, you’ll learn that the idea of demand centers on people being both willing and able to pay for a product or service.

After years of more or less continuous growth and relatively low macroeconomic volatility during the years named “The Great Moderation”¹, the US economy entered in December 2007² what seems to have been the deepest recession since The Great Depression3 The recession has been of relatively long duration and contained both a credit-crunch and a significant downturn in the housing market.

The probability for corporate success varies together with the business cycle, and there is no doubt that the state of the macro economy influences the rate of investor and corporate success. This means that the potential risks of changes in business cycle growth rate is a potential threat to all market participants, which needs to be handled through risk management.