Essay – Our Economy
The economy is consists of many factors which related to everyday life. It is the financial condition of the different sectors of the country and the world. These factors include the economic links, business cycle, interest rates, inflation and exchange rates. Money flows circularly through the modern economy. The macroeconomics model tells us that the level of economic activity is all depended on normal regular incomes and consumption which makes up the two sectors, firms and household sector. The model shows how each sector is dependent on others thorough money flows, where saving, taxation and imports are referred as leakages and investment, government expenditure and exports are the injections. During the regular business cycle, the economy of that country experiences the cyclical fluctuations in the level of a cycle. If the activity is too low, the cycle will turns into a recession and then a depression if it goes further more down; and economic boom is where the economy activities are increasing. An example of depression can be the Great Depression in October 1929 in America, with the collapse of the US stock market, and by 1930, the collapse sent the economy into a crisis, where hundreds of banks went out of business, more than 90,000 businesses failed and 13 million people lost their jobs. Interest rate is a rate of increase over time of a bank deposit, it can also be the annual cost of borrowing credit of annual return on invested savings. There’re two terms of interest rates, where short is suitable for purchasing cars and other smaller items, and long term is for borrowing huge amounts of money such as buying a house and company. However, the rise and fall of interest rates are depended on the status of the economy. Inflation is persistent increase in the level of consumer prices or persistent decline in the purchasing power of money. The method of measuring inflation is by comparing the Consumer Price Index. In 1914, Germany...
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