2 Defining Economics

Economics is a science concerned with how people use available resources to satisfy their wants through the process of production and exchange.

There have been many definitions of economics in the past. The earliest definitions envisaged economics as the study of wealth and the older name for economics was "political economy". Later economics was defined as "the practical science of the production and distribution of wealth".

At the turn of the 19th century economists defined economics as a study of man's actions in the ordinary business of life. At that time economics focused on how men got their incomes and used them.

In more recent years, the subject of economics was defined more precisely as "the science which studies how societies use scarce resources to produce valuable commodities and distribute them among different people".

Today economics deals with data on income, employment, expenditure, prices, production, consumption, transportation and trade.

3 The Role of Government in the Economy

In every economy the work of different firms has to be coordinated. In a market economy this coordination is achieved by means of markets. Nevertheless the debate over the role for Government in a market economy is continuing and the issue is being widely discussed at the present time. An economy based on free enterprise is generally characterized by private ownership and initiative, with a relative absence of government involvement. However, government intervention has been found necessary from time to time to ensure that economic opportunities are fair, to dampen inflation and to stimulate growth.

Government plays a big role in the American free enterprise system. Federal, state and local governments tax, regulate, and support business.

In the United States there are agencies to regulate safety, health, environment, transport, communications, trade, labour relations, and finances. Regulation ensures that business serves the best interests of the people as a whole.

Some industries — nuclear power, for instance — have been regulated more closely over the last few years than ever before. In others the trend has been towards deregulation or reduction of administrative burden on the economy.

The U.S. economy has a tradition of government intervention for specific economic purposes — including controlling inflation, limiting monopoly, protecting the consumer, providing for the poor. The government also affects the economy by controlling the money supply and the use of credit. The aim is a balanced budget.

4 Russia's economy

Dec 22nd 2011, 11:53 by The Economist online

Despite not seeing double-digit economic growth for over ten years, and been hit hard by the recession in 2009, Russia has had an average annual growth rate since 2000 of over 5%. And according to the OECD, a mostly rich-country think-tank, Russia’s economy will expand by 4% this year and next. While inflation is set to be over 8% this year, high for a middle-income country, at the beginning of the 2000s, it was over 20%. The unemployment rate has followed a similar pattern and is now below the OECD average. Labour force participation rates are also high.

But perhaps Russia’s most striking achievement is its fiscal performance. In contrast to persistent budget deficits in the 1990s, up until recently Russia enjoyed a series of surpluses, thanks to high and rising oil prices, economic growth, fiscal reform and prudent management.

Revenues from oil and gas, which by 2008 accounted for a third of all government revenues (some $200 billion), were used to repay external debt and build up assets in a stabilization fund, which was recently used to inject a fiscal stimulus. But Russia's budget balance is dependent on the oil price. Strip oil out and its public finances have been deteriorating since 2005. Reducing the public budget’s dependence on oil revenues would further modernize its economy. The OECD would also like to see a more business-friendly environment and effective social policies to reduce income inequality.