Respond to the following in a minimum of 175 words: Discuss the following statement from Principles of Economics: “Because the environment is fragile and natural resources are finite, ultimately econo

Ronnie wrote :

The statement brings to light several areas of the multi-faceted business model. Surely every business person and working career person aim to make more income. However, the statement itself provides the key term which sets the limit for continued growth, that is finite resources. Finite by definition means to have limits. For instance, countries with dense populations may run out of fertile land to grow food and require it to be imported. The United States has lots of land to grow and can export to the excess to countries in need. We must be conscious of Frank’s (2019) statement that societies should not always strive for the highest possible rate of economic growth. His key point to back the statement is that you would need to divert resources in order to accomplish added growth.

Trade balance among countries is the basis of the value of export to another and the value of the import by the other. Frank (2019) describes the equation as NX+KI=0,. Therefore, an example would be purchasing from China in the sum of $20,000 for their product. This gives the country buying power in the United States up to an equal value thus arriving to net zero. 

Lily wrote:

Economic growth is known as the increase in GDP, which is the total value of domestic production of all goods and services. GDP can be increased by either increasing quantity or increasing quality. So far, economic growth has been acquired by using Earth’s natural resources, such as oil. We have built vehicles to travel, but the gas contributes to pollution. We have cut down trees to make wood and paper. Our actions that have been seen to further our economic growth has led us to have an environmental decline. “There is some evidence suggesting that, when countries pass a particular wealth threshold, they become cleaner, less wasteful, and more efficient, all of which provide hope that sustainable development is possible. Rich countries, however, tend to export much of their resource-intensive and environmentally damaging economic activity to poorer nations” (Johnston, 2019). This suggest that the environment is truly fragile and we need to consider that economic growth comes at a price of losing our natural resources.

The net capital inflow is the difference between purchases of domestic assets by foreigners and the purchase of foreign assets by domestic residents. Trade deficits happen when a country’s imports exceed its exports. At any given period, the trade balance and net capital inflow has a sum of zero. Therefore, a country’s net capital inflows equal its trade deficit (Bloomenthal, 2020). For example, if I buy a Toyota for $20,000, there becomes a trade deficit of $20,000. My parents have traveled to China before and bought silk blankets shipped back home in the US. Their import also leads to a trade deficit. Only when the other country spends that money back in the US, can we have a trade balance of zero.

Bloomenthal, A. (2020). Trade Deficit. Retrieved from https://www.investopedia.com/terms/t/trade_deficit.asp

Johnston, M. (2019). Is Infinite Economic Growth on a Finite Planet Possible?. Retrieved from https://www.investopedia.com/articles/investing/120515/infinite-economic-growth-finite-planet-possible.asp