“If you really want to know which of the following is not an economic activity, keep reading.” That's the advice some good economists give aspiring students of business management. The first rule they give is to ignore what's happening in politics. They make a lot of political hay when criticizing the president of the United States for pursuing an economic stimulus package that will cost thousands of American jobs. At least one prominent Harvard professor says it's a mistake.
“The reality is that the vast majority of this economic spending will go nowhere or will be temporary or transitory and will not lead to job creation or rise in income levels,” says Harvard's Martin Frick. Okay, I'll admit that stimulus package could produce some short-term job gains. But, as soon as the program stops, so will those gains. And, we all know what happens when economies are growing. The end result is always recession. Which of the following is not an economic activity?
Businesses are spending money just about everywhere they can. If a business is buying widgets or paying for advertising, it is incurring price increases. Widget manufacturers and ad agencies have already announced record job cuts. Businesses are increasing prices to cover fixed assets, buy new equipment or pay for expansion.
Businesses must realize that consumer price inflation or price increases equal economic loss. It is true that rising consumer price also leads to higher employment rates. However, business spending on labor also leads to higher employment rates. Higher employment leads to higher income, which, in turn, leads to higher consumption.
“If you want to know which of the following is not an economic activity, look no further than your own business.” Businesses must take this into consideration when deciding whether to expand. Not only will expand operations cost money, they will also increase income (Gain). Of course, there is one caveat.
If businesses decide to expand and hire workers, they will also need to increase consumer prices. The costs of living is constantly rising, but the cost of labor is not. In an economic environment where consumer price inflation is high, businesses will have to pass these increased costs on to their customers. That is how they “make up” for lost profits from expanded operations. Businesses must realize that consumers are “taxed” by high prices and passed on to government.
Which of the two examples above is not an economic activity? Neither is it necessarily “good” or “bad”. Both examples are examples of economic activity. Which one is better? The answer depends on your point of view.
To decide, think about which of the two examples is closer to your point of view. Then decide which example is “more economic”. If you think consumer price inflation is good, then the second example is more economic. If you think consumer price inflation is bad, then both examples are less economic than the first one.
I don't want to get too far into the weeds. I'd like to keep the example easy. Ask yourself which example is “more economic”. It's either consumer price inflation or deflation. For most people, the answer is consumer price inflation.
But if you're a detractor, a lager-than-thou-thought detractor, then you might say something like, “Which of the following is more economical?” And again, you would choose consumer price inflation. After all, most people who think consumer price inflation is bad to think that it's actually good for business. Which is true, but it's only because of the distortions caused by the current definition of “activity.”
Because consumers . . . . . . decide to buy things based on current prices. Which of the following is not an economic activity? The activity of putting stuff on the market and waiting for demand to increase.
Which of the following is actually activity that determines the level of overall economic activity? The activity of creating new wealth. Which of the following is not an economic activity? The activity of making sure that future demand will be available. Which of the following is definitely more economical than consumer price index inflation?