LaborLabor is the mental and physical efforts of humans (excluding entrepreneurial organization) used for the production of goods and services. Let's get specific and formal for each of the four resource categories. This is the person, Clint Cobblemeyer, who makes the decision to build the house in the first place and then brings together the materials, workers, and tools needed to get the job done. ![]() This includes lumber, nails, screws, concrete, paint, roofing shingles, carpet, wallboard, bricks, and everything else that becomes the house. This includes hammers, electric saws, screw drivers, delivery trucks, scaffolding, paint brushes, shovels, and other equipment. This includes the carpenters, electricians, concrete workers, plumbers, roofers, painters, and everyone else who hammers, saws, welds, digs, and performs the assorted tasks need in the construction process. To see these inputs, consider a house being built by the Clint Cobblemeyer Construction Company. The production of any good or service inevitably requires four types of inputs. And entrepreneurship organizes the entire process. Capital is the tools that makes the job easier. Land provides the basic raw materials that become the goods. All four factors of production categories are important to the production of goods used in the wants-and-needs-satisfying process that keeps human beings alive from one day to the next and makes living just a little more enjoyable. Factors of production are also termed resources or scarce resources. ![]() If, however, the current account does not balance out the capital account, then a capital account deficit contributes to a balance of payments deficit.įACTORS OF PRODUCTION: Labor, capital, land, and entrepreneurship used by society to produce consumer satisfying goods and services. However, in the wacky world of international economics, a capital account deficit is often balanced by a current account surplus, which is generally considered a desireable situation. This is generally not a desireable situation for a domestic economy. In other words, investment by the domestic economy in foreign assets is less than foreign investment in domestic assets. AmosWEB means Economics with a Touch of Whimsy!ĬAPITAL ACCOUNT DEFICIT: An imbalance in a nation's balance of payments capital account in which payments made by the country for purchasing foreign assets exceed payments received by the country for selling domestic assets.
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