Adam Smith may have been given due credit as the ‘father of economics.’ However, if it were not for the creation of an economy as we know it today, his principles could not be actively put to good use.
Measuring goods and services
Not a fan of bartering or trading? Before the creation of an accepted economy, there was no cohesive system to explain banking, total national wealth, jobs, and market exchange. Unless you enjoy fuzzy math, the global economy could not maintain stability without defined measurements of income and outcome for goods, services, and debt.
A nation’s economy is compiled looking at its total resources, technology, military might, ability to pay debts, and consumer spending. When there is an economic downturn coupled with higher unemployment rates, a need to check and balance the economy to ensure fiscal health is an order. Unless you think bread lines were all the rage and need to make a comeback.
The GDP is the foremost determining factor of a country’s wealth and fiscal management. You can thank the Great Depression for pushing the U.S. into developing the current economy.
Influences from the stock market
The trading and selling of commodities and investments in businesses are conducted via the stock market exchange. There are various domestic and international exchanges, which tie into a nation’s inflation rate, and the exchange rate and value of a currency.
The ups and downs of the stock market got you feeling sick to your stomach? You’re not a hypochondriac, considering the health of the stock market has an impact on the cost of housing, job creation, and consumer confidence in spending. Who knew the economy was the world’s craziest roller coaster ride?
All The Eggs In One Basket
Some countries consider the addition of a black market economy, which boosts a nation’s total capital, consumer power, and financial transactions. Maybe working under the table isn’t so bad, if it’s going to help a nation’s GDP? But, there’s no substitute for a good lawyer or accountant.
Most countries ascertain how financially sound a country’s wealth and power actually are, based on GDP, national debt, employment rate, housing creation, and business investments. So, diversification really does pay off in dividends in the end.