What’s it called if I buy something like a sandwich, then consume it, and the net worth of society has now shrunk by 1 sandwich? Versus buying something that keeps its value.

Question

Maybe a better example would be a country getting leveled in a war. All of the money is still there, but now everyone is poor and has no net worth. How does that work?

It seems kind of like losing that amount of money, even though we didn’t?

In: 3475

Answer 1

It’s called “consumption.”

The net worth of society has not shrunk by 1 sandwich, because producers are constantly turning out more sandwich components at a rate that roughly matches sandwich consumption. And the same is true of any consumer good, be it food, household appliances, smartphones, etc.