eli5 How do economies grow? Who grows them?
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People producing stuff that others want. Investing in tech to make those things en masse and cheaper and cheaper. People making money doing these things but instead of spending the money immediately on goods, they save/invest/loan it out so that entrepreneurs have the capital to invest in new ventures to get people what they want.
The usual measure of size of an economy is the sum of all productive activities (those that count) in that economy and given a dollar value.
The “who” that grows the economy is everyone that works and earns a salary or profit from sales, and anyone engaged in making stuff. (farmers, factory workers, baristas, lawyers …)
People producing stuff that others want. Investing in tech to make those things en masse and cheaper and cheaper. People making money doing these things but instead of spending the money immediately on goods, they save/invest/loan it out so that entrepreneurs have the capital to invest in new ventures to get people what they want.
An economy is, simplified, just the sum of all the goods made and services provided in a country/area/world.
If more things are made (or those things are more valuable) and/or more (or more valuable) services are provided then the economy gets bigger.
You can grow an economy buy making the population bigger, more people can do more things.
Or you can increase the economic output per person, through better efficiency, better technology, or making them work longer.
The usual measure of size of an economy is the sum of all productive activities (those that count) in that economy and given a dollar value.
The “who” that grows the economy is everyone that works and earns a salary or profit from sales, and anyone engaged in making stuff. (farmers, factory workers, baristas, lawyers …)
People producing stuff that others want. Investing in tech to make those things en masse and cheaper and cheaper. People making money doing these things but instead of spending the money immediately on goods, they save/invest/loan it out so that entrepreneurs have the capital to invest in new ventures to get people what they want.
An economy is, simplified, just the sum of all the goods made and services provided in a country/area/world.
If more things are made (or those things are more valuable) and/or more (or more valuable) services are provided then the economy gets bigger.
You can grow an economy buy making the population bigger, more people can do more things.
Or you can increase the economic output per person, through better efficiency, better technology, or making them work longer.
An economy is, simplified, just the sum of all the goods made and services provided in a country/area/world.
If more things are made (or those things are more valuable) and/or more (or more valuable) services are provided then the economy gets bigger.
You can grow an economy buy making the population bigger, more people can do more things.
Or you can increase the economic output per person, through better efficiency, better technology, or making them work longer.
The usual measure of size of an economy is the sum of all productive activities (those that count) in that economy and given a dollar value.
The “who” that grows the economy is everyone that works and earns a salary or profit from sales, and anyone engaged in making stuff. (farmers, factory workers, baristas, lawyers …)
It’s largely about the flow of money. Money that is flowing is doing work, money sitting around is doing nothing
Increasing production increases cash flow in, but also increases expenses which is cash flow out, more movement of money is generally seen at a healthier economy
Therefore the summed up difference between cash flow in vs cash flow out of all businesses is the primary metric we use to measure “the economy”, its how much “profit” *hypothetically could* be realized in a given time period
Example: Various countries have a VAT (value added tax) which is an attempt to spread the taxing of the economy through the various steps of manufacture. As opposed to sales tax which on the books is only paid by the customer, not the intermediate businesses who only sell to other businesses. One is taxing the economy, one is taxing consumption, both have trade-offs
Please do let me know where I got this wrong, as I have no formal economic education. The “example” is very weak and poorly explained
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