Make Sense of
the News
8 modules + capstone. Go from confused by headlines to reading economic news like an analyst.
How Economies Actually Work
The engine under everything you read in the news.
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Module 1
How Economies Actually Work
Every economy runs on four engines. Consumption (C) is households buying goods and services - the coffee you buy, the phone you purchase. Investment (I) is businesses building factories, buying equipment, hiring. Government spending (G) is roads, schools, defence. Net Exports (X−M) is what we sell abroad minus what we import.
These four together give you GDP - Gross Domestic Product. The formula: GDP = C + I + G + (X − M). Every single number in this equation moves markets and headlines.
- Consumption = 55–70% of GDP in most economies
- When investment falls, unemployment usually follows
- A trade deficit (X < M) shrinks GDP - that's why tariffs are so political
The circular flow - every economic actor is connected
🎯 Module 1 Quiz
Test your understanding. Click an answer to reveal the explanation.
Quick Check
1. What does GDP stand for?
2. Which component makes up the largest share of GDP in most economies?
3. A recession is technically defined as:
4. A PMI reading of 48 tells you:
5. What does a falling Labour Force Participation Rate usually indicate?