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Managing money at home, across the country and around the world

A young Vernon Area Library patron asked, “What's going on with the economy?”

Economics is the study of managing money.

In a small scope, it is how a family might spend money on food, energy and other living expenses. In a larger scope, it's how the whole country builds income from taxes and allocates the funds for roads, military and services. And, in the biggest sense, it's how the world supports people with available financial resources.

Originally, the field was called political economy because social behavior drives how money is spent.

The U.S. government has a Bureau of Economic Analysis and Office of Management and Budget to keep track of the economy. They analyze gross domestic product, GDP, which represents the sales of products such as cars, spending by state governments and business investment. They collect statistics on personal income, the buying and selling of manufactured goods, industrial goods sales (things like mining and technology) and other economic measures.

By tracking sales and incomes, analysts can measure the health of the economy.

Kathleen Madigan, special writer-economics for The Wall Street Journal, shares this overview on economics: “Just about everything you do is connected in some way to the economy. Your parents get paid to work at their jobs. They use that money to buy the food that was your dinner last night. Your teachers at school are paid to educate you. If you get money from baby-sitting or an allowance, you probably buy candy or video games. Even the White Sox and Cubs are part of the economy.”

For the past 10 years, the economy has been on a roller coaster with near collapse in 2008 and slow but steady increases since then. Do people have more money to spend? Are items, such as gas, food and clothing, more expensive? Have incomes increased as the economy gains strength?

“Right now, the economy is not growing as strongly as we would like,” Madigan said. “A big reason is because regular people — what economists call consumers — do not have a lot of money to spend. Millions of people who would like to work cannot find jobs so they aren't getting paychecks. People with jobs are not getting big pay raises or are getting no raises at all. That means families do not have money to spend on extras like new shoes or going out to the movies. The lack of spending circles through the economy. For instance, when people do not eat at a restaurant, that means less work and pay for the cook and waitress who work there. Then they can't spend, and so on.”

But everything can change. A dip in gas prices might make shipping food across country less expensive, which means your parents might pay less at the grocery store. Anything can bring on a change, and if one area of the economy gains strength, then others follow.

For this year, Madigan said, we may see businesses rewarding employees with bigger paychecks.

“Economists think pay raises will be bigger this year,” she said. “If that's the case, consumers will have more to spend and the economy will look stronger by the end of the year. If workers don't see bigger paychecks, then the economy will continue to struggle.”

Check it out

The Vernon Area Public Library District in Lincolnshire suggests these titles on the economy:

• “Economy” by Rennay Craats

• “Economics and Economic Systems” by Brian Duignan

• “A Kid's Guide to the Economy” by Tamra Orr

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