Velocity is a measure of how often money “turns over” in a period. It is equal to nominal GDP divided by the nominal money supply. The quantity theory of money assumes that velocity is constant, which implies that real money demand is proportional to real income and is unaffected by the real interest rate. 7. Equilibrium in the asset market is described by the condition that real money supply equals real money demand because when supply equals demand for money, demand must also equal supply for nonmonetary assets.
Should the government influence the economy or stay away from it? Should economic policy be focused on long term results or short term problems? This and other such beliefs form the difference between the two major schools of thought in economics: Classical and Keynesian economics. For one thing, Keynes refuted Classical economics' claim that the Say's law holds. The strong form of the Say's law stated that the "costs of output are always covered in the aggregate by the sale-proceeds resulting from demand".
It helps us to understand the relationship between the usage of money and the value of returns it provides from a particular venture or avenue based on the time it would take for providing the return and the future value of the return. Opportunity cost is economic decisions based on a limited resources i.e time or money. Opportunity cost is defined as the next best choice available for a person. Opportunity costs are not restricted to monetary costs only. Trade-off is the form of either buying less or a lesser quality item in order to purchase more or a greater quality item.
Operating cost- money spent on a regular basis used by the business, while running the business. This can be a variable cost or a fixed cost. Variable cost- this refers to the direct cost of buying materials, finish goods and direct labour. Variable cost is so called variable as they are depended on the level of outputs. Fixed cost- fixed cost is costs that are not depended on the level of output/sales.
Although the exact wording varies from author to author, most textbook definitions of economics say economics is “the social science which examines how people choose to use limited or scarce resources in attempting to satisfy their unlimited wants.” In the introduction of The Wealth of Nations Adam Smith states: “Political economy, considered as a branch of the science of a statesman or legislator, proposes two distinct objects: first, to supply a plentiful revenue or product for the people; and secondly, to supply the state or commonwealth with a revenue sufficient for the public services. It proposes to enrich both the people and the sovereign” (5). Smith's book addressed the concepts of labor, self-interest, and trade as critical components of a free market. Although specifically
ECO 372 Week 2 DQ1 How does is the difference between real GDP and nominal GDP affect you? Or if it doesn’t, why not? Which one do we use to measure growth (or shrinkage) in the economy, and why? What does a change in GDP mean to you and your family? Answer: How does the difference between real GDP and nominal GDP affect you?
* Net profit percentage – This calculation takes the idea of profitability one stage further by actually considering the profit as a percentage of turnover after all the other expenses have been taken out. Looks something like this: Net profit x100 = net profit percentage Turnover * Return of capital employed – This calculation is worked out by considering the net profit as a percentage of the capital employed by that business. The reason this ratio is useful because it shows the amount of money an investor is receiving back on their capital as a percentage. This means they can
Producer surplus is closely related to the supply curve and is measured using the graphical representations. b. What is the relationship between the cost to sellers and the supply curve? The relationship between the cost to sellers and the supply curve is the area below the price and above the supply curve measures the producer surplus in a market. c. Other things equal, what happens to producer surplus when the price of a good rises?
Internal: Internal sources of finance is money which is readily obtainable within the company. Internal sources of finance consist of: Owner’s investment Owner’s investment is a long-term source of finance. This source of finance comes from the personal savings of the owners of Tesco. Owner’s investment is often used as a start-up capital when opening a new business and as additional capital to expand the company. Also, as Tesco is a PLC company (Public Limited Company) it is mainly owned by public, they invest money into Tesco by buying their shares.
He introduced the idea that “…fiscal policy can be used to maintain a high level of output and employment” (Gwartney, Stroup, Sobel, & Macpherson, 2015, 216). Keynes (Gwartney, Stroup, Sobel, & Macpherson, 2015), indicated that businesses will produce only the quantity of goods and services that they believe consumers, investors or foreigners, will buy. After being adopted into the mainstream of economics, the followers of this concept began calling themselves Keynesians. These economists believed in offsetting the fluctuations in aggregate demand. The ups and downs, or fluctuations, occur during recessions or depressions.