Believe it or not, but, your everyday life is effected by the economy. I'm sure each person goes to the mall, and to the shoe store. Well, let's say you just heard about these awesome sneakers, and almost everyone you know wants a pair. You go into the shoe store to find them, and they are all sold out! You have just been affected by the SUPPLY of a product.
The more people want something, they higher the price will be. Then, you figure you will wait for a while, until the price of those sneakers goes down, but, they are THE most popular sneakers ever made. Guess what, the next time you go to the store, the price has actually gone up! Because EVERYONE seems to want a pair of these things. The company now figures that the sneakers will be popular forever, so... they get a whole bunch more employees, and start making more and more of the sneakers, so ALL the stores have them in stock.
Sooner or later, people get tired of the new style, and most of the people that wanted a pair got one, so now, the shoes are starting to pile up on the shelves at the store, and now the store has to get rid of them somehow, so they start to put them on sale. The "economy" has just been affected by Supply. The more of something that is available, the lower the price. The United States has a "Free Market" economy, which means that the prices of our products are determined by the will of the consumers. Consumers will only buy what they determine that they "need" at the time, and what they have enough money for. If they have more money than they need at the time, they will buy things that they "want." These are two more terms used in economics.
"Needs" and "Wants" are completely different terms. People HAVE to buy the things that they need, but do not necessarily HAVE to buy the things that they want. Things like clothing, food and housing are things that we need, but, we can live without such things as the latest sneakers, or video games. Each persons' needs and wants are somewhat determined by their own personal economic situation.
If a person is independently wealthy, they can buy whatever they wish, but most people have to deal with a certain amount of money. They cannot spend whatever they wish. Our country right now is at an all time high for spending, despite some of the happenings on September 11 th. This is not necessarily a good thing.
You have heard the old saying, "a penny saved is a penny earned", well that is exactly what people are now saving. One penny is now being saved for every $10 worth of income. Our country has one of the lowest savings rates of any industrialized country in the world. When we retire, we will have to live on things like social security. As you may have heard from all the election promises, the candidates are telling everyone they will help the elderly people with their medicine costs. These people probably did not have the chance to save.
Savings is an important thing in our country. It is also carefully watched by the Federal Reserve Bank. Alan Greenspan, is the head or chairman of the Federal Reserve, which monitors and controls the "fiscal policy" in our country. Fiscal Policy is what the chairman uses to control the prices of goods and services in our country. The control he has over our economy is with interest rates. If he raises the rates in our economy, people and businesses will not want to borrow money for new things, and may want to save more.
If people do not buy things, as you found out earlier, prices go down. The opposite thing is supposed to happen if he would lower interest rates. Today the United State's economy is the largest and most advanced economy in the world. In 1998 it included more than 20 million businesses and 270 million consumers.
Almost 80% of the products purchased by the consumers were made in America, and with $5. 5 trillion dollars being spent every year, that makes more money to create our factories. And to think, we don't even have the most land, the largest population, or other resources. That's pretty amazing. I think that our economy may not be too stable right now. A lot of things have happened to it, and it has taken a nosedive.
But, it has before and it recovered, and I'm sure it will again. We are such a powerful nation, and we can always recover from the things have happened to us. With all of the facts that I have just given, it is reassuring and really gives you faith that our country will once again have a booming economy.