Economics is the study of human behavior and society. Studying economics is an excellent way to learn how people respond to external circumstances, whereas reading a mere history of events can feel like listening to a story. Economics requires reasoning and logic as you try understanding how people act when faced with economic pressures or opportunities.
Economic news often deals with the health of economies. Still, it sometimes includes international trade agreements, environmental issues that may impact trade relations between nations or government bailouts for institutions at risk of failure (ex: banks).
How Economics Works
The purpose of economics is to understand how people and businesses react to incentives and how different economic decisions have impacts that can be measured on the overall economy. Economics is intended as a science that can predict and explain future outcomes. By approaching economics as a way to test, in theory, how people will react under different sets of circumstances, economists gain valuable insight into human behavior by observing the results of their tests.
Types of Economics
Macroeconomics deals with the economy at a national scale and studies how the economy as a whole reacts to economic stimuli. In general, macroeconomics examines economic trends related to unemployment, inflation, trade imbalances, tax policies, and other things that impact economies. Macroeconomics gives data about the overall national economy and may examine specific industries within that larger picture.
Microeconomics studies behaviors at an individual level, for example, how consumers respond to prices for particular goods or services. Microeconomics examines respective companies and industries to assess overall economic trends.
3. International Economics
International economics is a study of economies in relation to other economies, particularly at the global level. International economics may examine trade agreements, currency agreements, international banking, and the impact of trade on different economies at different times. For example, international economics may look at how the US economy fared after China entered the World Trade Organization (WTO).
The Federal Reserve (Fed), a central banking system, manages the US money supply, which impacts economic trends. Fed officials have very few controls over economic trends on a national level, but their policies can significantly impact how quickly or slowly the economy grows. The interest rates set by Fed officials substantially affect investment decisions by businesses and individuals and specific industries such as real estate or car sales.
Effects of Economy on Society
There is no hard line between economics and sociology; both fields look at how people live together in society and how social relationships impact how businesses operate. Economics, however, looks at how money is invested and moved throughout the economy.
Economics can be a practical way to understand how political leaders and businesses respond to economic stimuli. A company may lay off 5% of its workforce in response to less than desirable growth in sales; that is also an economic decision seeking efficiency to maximize profits.
The Importance of Economic News
1. Economic news is a significant factor in the job market.
People need to learn more about what jobs are available and what it takes to obtain certain positions. A potential employee may know of a particular industry but not the specific requirements to be considered for that industry. It is where economic news can be very useful in understanding workers’ career paths.
2. Economic news can affect your financial well-being
In economic news, many stories discuss ongoing issues and conditions that could impact an individual’s financial situation (and others). People may look at these stories for advice on preparing for major life changes (such as marriage, retirement, or college expenses).
3. Economic news is an excellent way to keep up with current activities
Many people look at economic news because they want information about how their country is doing in the economy. With that knowledge, individuals can learn how well their government is handling budget issues or what the impact may be on taxes and interest rates for different industries. Economic news can also provide insight into the stock market, job market, and other economic factors that affect a person’s everyday life.
4. Economic news provides perspective on a variety of topics
Economic news helps people learn more about the world and how things are handled differently from country to country. For example, a consumer may want to purchase goods in bulk from another country if the price is less than it is within their nation.
The consumer may be interested in knowing what tariffs (taxes) are imposed on imports by their government and whether those taxes are high enough to discourage the purchase of certain foreign goods.
5. Economic news can provide you with better insight into your lifestyle choices
Economic news allows consumers to look at how businesses operate, especially regarding pricing decisions and production methods. Individuals may want to know if it is wise to purchase a new computer or model of car or what types of new products are desirable within their industry. Economic news allows individuals to learn more about businesses’ functions and how different companies operate.
6. Economic news can provide insight into current events
Economic news may shed light on current events (such as a trade agreement) or economic conditions that create particular problems for businesses and other areas of the economy. For example, the economy may be experiencing an economic downturn because of a large amount of debt at a particular company.
Economic indicators are used to monitor the performance of a particular economy. Many economic indicators can provide information about what may happen in the future based on what has happened in the past. For example, an economic indicator may examine a country’s gross domestic product (GDP) over the last ten years to get a sense of its annual growth rate and then calculate what that growth rate might be over the next ten years based on historical trends. It makes it possible for economists to predict future GDP based on past GDP data.
Economic news is a practical way for individuals to learn about the economy. Financial news can help show how vital economic factors are and how they impact the everyday lives of individuals. These stories can assist people in making life decisions, being better-informed citizens, or even being more aware of political figures and their actions about the economy.