The Economy: Where Money Matters
Sayonnia D. Viner
Professor Kimberly Hayes
Introduction to Business
November 03, 2012
The Role of Business in the Economy The role of business has always been to act as a vehicle for economic progress. As businesses are able to grow and expand so does the economy. This growth directly affects us all and can raise the standard of living. In contrast when businesses are stifled, unemployment rises and the economy suffers greatly. In the United States we subscribe in most part to the free market system, where private ownership is paramount. It provides endless opportunities for individuals to become entrepreneurs and obtain success that otherwise would have been unattainable. The free market creates competition that encourages businesses to offer the best goods and/or services at the lowest prices. The United States is also representative of a mixed economy, where departments of the government owns enterprises like schools, museums, libraries and the military to name a few. Believe it or not nonprofit organizations make up more than twenty percent of the economic activity in our country. Businesses contribute large sums of money to government through taxation, which allows it to properly function and run these large enterprises. Needless to say, a healthy economy is in the best interest of all parties. Many people today also underestimate the contribution of small businesses to our economy. While it is grossly understated at times, small businesses are invaluable to a thriving economy. In 2004 there were approximately twenty four million small businesses in the United States. Small companies with less than five hundred employees make up about ninety nine percent of the twenty four million businesses referenced. “Small businesses create more than half of the nonfarm private gross domestic product, and make up 97.3 percent of all U.S. exporters. In recent years, they have accounted for approximately fifty five percent of the private sector workforce.” (Danner and McCracken, 2011) Small businesses in particular, traditionally train the workforce by employing people in their first jobs and many of those returning to the workforce. They are absolutely necessary for economic progression and ultimately a successful economy.
For Profit vs. Nonprofit
By definition a business is any activity that provides goods and services in an effort to earn a profit, thus creating wealth for its shareholders. In contrast a nonprofit organization exists to achieve some goal other than the usual business goals of profit, return on investment or market share. Most nonprofit organizations are created to respond or to meet the needs of specific groups or the general public. Having said that, both nonprofit and for profit organizations have many similarities. In some way shape or form, both provide a good or service for society. Likewise they must also bring in more money than they spend to survive and/or expand. Both are also dependent on their employees to run and manage the companies. In regards to for profit organizations, the money left over is distributed to the owners as cash. In the case of nonprofit organizations, the leftover cash is used to provide goods or services to the groups they were established to help. New investment for nonprofit organizations comes in the form of contributions from individuals or other corporations. A for profit business is usually started by investors who own shares of stock in the company, which entitle them to ownership of the company itself. When ethical and successful, both for profit and nonprofit businesses can be a valuable asset to our economy.
Current Fiscal and Monetary Policy There is no doubt that the US is currently recovering from a severe recession. This recession was largely due to the housing crisis that took place a few years ago. In an effort to revive the economy, the