Trade, Money and Capital

Topics: Economics, Macroeconomics, Capitalism Pages: 4 (950 words) Published: November 12, 2012

Features of a modern economy

1. - Specialization and division of labor
2. - Measure economic values
3. - Stock of capital

* Trade, specialization and division of labor.
* Specialization: occurs when people and countries concentrate their efforts on a particular set of tasks, it permits each person and country to use to best advantage the specific skills and resources that are available. * Division of labor: dividing production into a number of small-specialized steps or task. * Specialization and trade are the key to high living standards.

* Globalization
* Globalization: is used to denote an increase in economic integration among nations. Increasing integration is seen today in the dramatic growth in the glows of goods, services, and finance across national borders.

* Money: the lubricant of exchange
* Money: is the means of payment in the form of currency and checks used to buy things. Lubricant that facilitates exchange. * Governments control the money supply through their center banks * Money is the medium of exchange. Proper management of the financial system is one of the major issues for government macroeconomic policy in the countries.

* Capital
* Capital: a produced and durable input, which is itself an output of the economy. It consists of a vast and specialized array of machines, buildings, computers, software, and so on. * Capital has to be produced before you use it.

* Growth from the sacrifice of current consumption
* Economic activity involves forgoing current consumption to increase our capital. Every time we invest we are enhancing the future productivity of our economy and increasing future consumption.

* Capital and private property
* In a market economy, capital typically is privately owned, and the income form capital goes to individuals. * Capital goods also have market values, and people can buy and sell the capital...
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