Econ 372 week 3 - Understanding the importance of money in...

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Understanding the importance of money in the Economy .. 1 Sarah Bellin Money and the Prices in the Long Run and Open Economies May 22nd, 2017 ECO/372 Professor Johnson In today’s economy, it is important to create a market plan to foresee the United States money growth, prices, and the economy as a whole. It is important that the plan has transparency
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Understanding the importance of money in the Economy .. 2 and reliability to have functional outcomes. We will analyze the history of the gross domestic product, monetary policy, government policies, monetary policy, trade deficits, international trade, and economic growth. History of Changes in Gross Domestic Product For decades, the most widely accepted measure of a country’s economic condition has been Gross Domestic Product (GDP). “GDP is an estimate of market throughput, adding together all final goods and services that are produced and traded for money within a given period of time. It is typically measured by adding together a nation’s personal consumption expenditures (payments by households for goods and services), government expenditures (public spending on the provision of goods and services, infrastructure, debt payments, etc.), net exports (the value of a country’s exports minus the value of imports), and net capital formation (the increase in value of a nation’s total stock of monetized capital goods).” (Mankiw, N. G. 2015) The GDP was introduced in the United States sometime between the 1930’s and the 1940’s. During this time the United States was in the middle of World Wars, and the Great Depression, so the economy wasn’t the greatest.. At the time President Roosevelt’s government used statistics to create policies and budgets to help bring the United States out of the devastating depression. When the United States was faced with being involved in the second World War many were worried of how we could financially and economically support another war, especially right after finishing the first world war. This is when the gross domestic product strategy became a huge help for the United States. The GDP showed that the United States economy could provide enough supplies for fighting in the next world war, as well as show the prosperous economic well being of Americans.
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Understanding the importance of money in the Economy .. 3 Since the introduction of the GDP economists have warned against its use on the economy. Economists are saying that it should be used as a tool, not as an indicator of the economic well-being. In today’s world the GDP is a widely popular tool used to see the economic growth, and is regularly referred to economists to use. Some economists are still against the use of the GDP, and how detrimental the effects can be on the economy. They say the using the GDP to accurately judge the economy is like measuring a building’s energy use. It is said that when more energy is used within a building, then the occupants inside must have a better quality of life. This isn’t always the case, although energy can provide a sustainable life, it
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