How many of you love playing Monopoly, Game of Life and Mine-craft? Well, these are not just any ordinary games; they are smart board games that teach you how economy works.
Where does the term economy come from?
The word economy comes from two Greek words- “household” and “manage.” Through the economy, goods and services in a particular region are produced in a way to produce profit.
Goods are physical objects that are bought and sold such as things like cars, clothes and food items.
Services are facilities provided by others for which we pay them. Services include things like teaching, healthcare, fire-fighting, and baby-sitting.
What is Economics?
The study of the economy is called Economics and a person who studies economics is called an Economist. A country is said to have good economy when the trade is flourishing and there are lots of good – paying jobs available for the citizens.
Economics has two branches – Macroeconomics and Microeconomics
What is Microeconomics?
Microeconomics is the branch of economics that tells us how people make decisions at a small scale. In microeconomics, we learn about the small – scale financial decisions. For example what and how much to buy from the store, or how many products a company should manufacture.
What is Macroeconomics?
Macroeconomics helps us to look at a bigger picture. It looks at the economy as a whole and while Microeconomics has to do with a individual or a company, Macroeconomics deals with a country or is global.
The study of macroeconomics includes the Gross National Product of a country, unemployment rates and its imports and exports etc.
Basic economic terms and concepts –
What is a Bank?
Bank is a financial institution that keeps our money safe. We can deposit and withdraw our money from the bank according to our convenience. Money that is in the account earns interest from the bank. That is, the bank pays the account holder a small fee.
What is Credit?
Credit is the ability to borrow money. For example, if we do not have enough money to buy something on our own, we can borrow money from the bank. This is known as bank-loan. People take bank-loans for buying cars, making houses and education of the children among other things. Bank-loan is a type of credit that the bank gives us. We have to return the loan to the bank along with an additional ‘fee’ that is known as the ‘interest’. Another type of credit is a credit card. If we have a credit card, we are allowed to borrow some amount of money from the respective credit card company or the bank through it for a particular period of time. We have to return that money to the credit card companies with a certain amount of, yes, you guessed it right- ‘interest’ later on. So, the next time you swipe the credit card of your parents for buying things, please remember, a bill with ‘interest’ would be coming soon. Use it prudently!
What is Debt?
Debt is the money that someone borrows from the other person, companies or the bank. It is an amount that is to be returned to the lender with or without interest.
What is Interest?
Interest is the fee that is charged for using someone else’s money.
What is Investment?
Investment is anything that is bought with the hope that it will generate income or become more valuable in the future. While some investments may result in a loss, some are sure to bring you profit. For example, a bar of gold will certainly be worth more in ten years from now.
What is a Mortgage?
Mortgage is a loan that we take against our personal belongings like gold or house from a bank or a finance company.
What is a Recession?
A drop in economic growth of a country and its business activities that lasts for more than 6 months is called recession.
What is Stock?
Stocks are sold by companies to raise money from the buyers. When we buy a stock in a company, we become owners of a small part of that company.
What is Stock Market?
Stock market is a place where stocks are bought and sold. A stock broker is a person whose job is to help us in buying and selling the stocks.
What is Taxes?
Taxes are the main way people pay for their government. Income taxes and sales taxes help the government pay for things like roads, schools, and the armed forces.
What is Unemployment?
The unemployment rate is the percentage of citizens who are out of work and looking for jobs. High unemployment rates are a sign of a weak economy.
What is GDP?
Gross Domestic Product, or GDP, is a measure used to check the health of a country’s economy. It is defined as the total value of all products manufactured and goods provided in a specific region during a specified period, usually, one year.
What is Inflation?
Inflation indicates a rise in the level of prices of basic commodities as compared to the money available. Ask your grandparents how much one pen cost when they were students like you. Compare it with the price of a pen today. You will get your answer.
Dear children, every time you make a financial transaction, you learn something about the economy. The best way to understand more about economy is to make wise use of your pocket-money by saving it and making a budget. This includes making a priority list of the things that you truly need. If you know how to use your money wisely right from the beginning, you will have absolutely no problem in comprehending the nuances of Economics as a subject later and become a wise spender of money.