Economics Basic Economic Concepts

Consider Fig. Wealth is measured and depicted here in terms of wealth-to-income ratio. In the beginning, as Fig. The wealth of the US represented here is the net wealth of the country owned by its citizens. The value of liabilities has been deducted from the value of assets Economics Basic Economic Concepts arrive at net wealth of the country, which in physical form take the shape of housing units, office buildings, public infrastructure, industrial plants, and factories, developed agricultural land, etc.

Economics Basic Economic Concepts other words, the wealth stock of the US today the movie aggregate funds invested through annual savings accumulated by the country over a very long period, all the way from or time immemorial, theoretically to present. Wealth lost due to ravages, natural calamities, pillaging have all been take into account.

Thereby the figures in a given year discount all lost wealth up to that point and aggregate all remaining wealth to be measured for at the end of the year in terms of times of annual national income for the year. That aggregate wealth is the basis and the source of all income earned by the citizens of the country.

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The national wealth stock composition of the United States, as we just saw in Fig. That figure is a classic example of aggregate wealth stock classification characterized by feasibility of data collection. The classification seen in the figure involved Agricultural land, Housing capital, and other domestic capital.

Agricultural land essentially is developed land—land, already inherited by man. Housing capital is built.

Other domestic click includes plant, machinery, equipment that is manufactured and installed and the structure of plants as well. Capital such as public infrastructure and public capital such as government buildings is also included in Other domestic capital. That kind of classification of wealth is not very helpful to understand the dynamics of economic development.

Although on an individual level, the net worth is merely the difference between the value of assets and liabilities at any given time, on a national level focus turns to ultimate capital—the physical, that is, which underwrites all locally generated assets and liabilities in a country. To reiterate, natural resources that are undeveloped do not comprise capital.]

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