Tcxl 3 g0p and gnp

The measure of economic activity that includes all the goods and services bought or sold m a country over the course of a year is called gross domestic product (GDP).

GDP measures a country's economic activity, just as a speedometer is used to measure the speed of a car. When a country produces more goods and services, its economic activity speeds up. In other words, the GDP increases. A healthy economy grows steadily, over a period ol months ox years. When growth stops or slow s down, the economy is said to be in a "recession."

When the international activities of a country's residents arc added to GDP. a wider more global measure of a country's total economic activity is created: Rross national product or GNP Both measure* tell more or less the same story GDP conccntratcs on the purely "domestic" production ol goods and services covering only the economic activity which lakes place within the country's borders, white GNP includes net international trade and investment, which includes everything from exports of movies and compct disks to foreign earnings and travel abroad.

GDP and GNP try to measure every legal good and service that an economy produces. At each stage of production, every time that monetary value »s added, a country s GDP and GNP are increased

r

MONEY

Money ranks as one of the greatest inventions of all time. Outside of some monumental discoveries in physics, chemistry, and medicine, perhaps no other invention has had a greater positive impact on overall welfare. But like nuclear fission, money serves people best when it is controlled.

'Money is anything commonly used and generally accepted as a medium of exchange and as a unit of account*. This is a functional definition of money bccausc it embodies the two most important functions of money. The word "anything" is used to avoid restriction Throughout history many things in local economies have been used as money (or legal tender) cattlc, stones, tobacco, wampum, shark's teeth. The term "commonly used" indicates that wc do not wish to include items thai arc occasionally used, such as cigarettes. The term "generally accepted is used because we wish to include only those items that people are always ready and willing to accept and accumuilalate in great quantity

Economists define money (or cquivalently, the money supply) as anything that is generally accepted in payment for goods or services or in the repayment of debts. Currency, which is bills and coins, clearly fits into this definition and is one type of money. When most people talk about «money» they're talking about currency.

Markets—tub institutions where price is decided

A market is defined as a place where buyers and sellers are in contact with one another to fix prices.

This contact may be established directly, e.g. where retailers buy supplies at the wholesale produce markets, such as Covcnt Garden; or indirectly through specialists, such as the brokers and jobbers* on the London Slock Ex change. Physical presence in the market iv not necessary; indeed, the Foreign Exchange Market is largely conducted by telephone.

Generally speaking, the major markets are such specialized affairs, and dealings arc conducted in such large quantities, that the general public is ill equipped to deal upon them. For instance, the minimum contract for wheat on the Liverpool Wheat Exchange is 125 tonnes, and the minimum contract for sugar is 50 tonnes on the London Sugar Futures Market. Such markets are called highly organized markets, and only experts may deal on them.

While absolute perfection in the market is difficult to achieve, some of these institutions come very close to the perfect competition imagined in theoretical economics, and equilibrium price is established in conditions where pcrfcct knowledge of the market and complete absence of friction exist.

One of the Commodity Markets is The London Metal Exchange where copper, tin. lead, and zinc arc bought and sold.

•JobtK-rs • джоббер (яйцо, выполняющее на фондовой бирже операции с ценны-чи бумагами, причем отличие от биржевого маклера ю собственный счет )

Text 7