Getting comfy with big numbers!

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First in a series: IT’S THE ECONOMY!

By Craig Welling

Before looking at historical information, let’s look at some terminology commonly used to describe the overall economy.

Growing: If the overall economy is growing (expanding), there should be opportunities for us as individuals to benefit. Maybe a pay raise, a bonus, or a change of jobs for better pay.

Starting a new business or expanding an existing business could provide higher income and profits. The chances of borrowing money to finance the business will probably be improved in a growing economy.

Stagnant: If the economy is not growing, the chances for personal gains and/or business gains are less plentiful. On average things are not getting better or worse. Maintenance of the status quo is expected.

Recession: If the economy is shrinking, jobs are being lost, individual incomes are being reduced and businesses are cutting back and/or closing altogether.

The chart below shows economic growth rates (below Zero = Recession, Above zero = Growth)

The status of a local economy, your neighborhood, the city, the county, the state may be different from that of the overall economy at the national level.

But a growing national economy can increases the chances of having a growing local economy.  While a national recession can reduce the chances of having a growing local economy.

Regardless, the long range goal is to improve the economy at all levels, foster growth, and avoid recession. Doing so increases economic opportunities and prosperity. At times the Public sector (the government) and the Private sector (everybody else) appear to be working together to achieve that goal. At other times, not so much.

Big Numbers: Before looking at the history of the national economy it is also important to get comfortable with big numbers. Labels such as Thousands, Millions, Billions, and Trillions are often used to present dollar figures.

A  Thousand dollars, $1,000 Maybe it is enough to pay the rent or enough to buy groceries for several weeks.

A Million dollars, $1,000,000 If you have a winning million dollar lottery ticket, it’s enough for you to get a thousand dollars every week for about 20 years.

A Billion dollars, $1,000,000,000 If you and 999 others each with a million dollar winning lottery ticket got together, the group would have a billion dollars in winnings.

A Trillion dollars, $1,000,000,000,000 is a Million-Million. If you had a trillion bucks, you could pay all of the nation’s social security retirement and disability benefits for about one year.

A bunch of numbers can be boring. So look for some graphs in this series of articles, where a few terms will be important:

  • Real – the financial information is adjusted for inflation. Financial performance over time, particularly over several years –  if not adjusted for inflation – can be misleading.
  • Per Capita – the information is per person.
  • Mean – average. The mean of 1, 2, and 96 is 33.
  • Median– middle value if numbers are ranked. The median of 1, 2, and 96 is 2.

Next week, we will take a look at GDP, or Gross Domestic Product – the total of everything our nation produces in the course of one year. So now – go out and earn a few bucks!!