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Social Security index (Fearless Blue)

Simcountry: Simcountry Bulletin Board  Social Security index (Fearless Blue)

John Gresham (White Giant)

Friday, April 15, 2005 - 01:35 am Click here to edit this post
therefor, cash is a resource.

The American Heritage dictionary is written by linguists, not economists. I'll stick with the economic definition.

therefor, yes. intrest rates add to the GNP.

Higher interest rates are a contractionary monetary policy, and actually tend to reduce the GDP by reducing aggregate demand.

open market operations is where the value of the product produced is determined.

Open market operations is the federal bank buying or selling treasury bonds. The decisions to do this are made by the Federal Open Market Committee (FOMC), a part of the Federal Reserve Board. These operations affect money supply which is not the same as GDP. GDP = C+G+I+(X-Im) (Consumer spending+Government spending+Investment+Net Exports.) Investment doesn't mean spending money on the stock market. It means spending money on the capital market for a business to buy capital. Money supply is M1. While money supply affects GDP by affecting aggregate demand, it is not itself GDP. You'll notice I didn't say "production" when I made that list of stuff that affects the demand or supply of money-- it is a factor of the demand for the currency, but you can't be as simplistic as you are trying to be.

Don't believe me? Look here. That place and many others confirms my definition.

if you read all the gabber on GDP, it goes on to in include "plus returns on US financial investments" which is another way of saying income from loaned out money.

I think you may have strayed into National Income accounting, which is not the same thing. (Income=Wages+profits+rent+interest.) It isn't returns on investments that matter in GDP but the actual investment itself in the form of capital bought by new monies invested into a corporation (as opposed to buying/selling already existing shares on the secondary market, also known as Wall Street or "the stock market"-- the difference is that the capital market involves shares that are sold by the corporation itself, not a stockholder; investment requires shares to be created rather than traded.) Investment spending is what matters, not the returns on it. Returns on investment spending simply make people more likely to invest.

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