Wealth

economic-dictionary

Wealth, from an economic point of view, is the opposite of poverty. It refers to the abundance of resources, both material and immaterial, that a person possesses (individual wealth) or a group (national or social wealth).

Wealth, always seen from an economic point of view, is the abundance of resources of a person or group, regardless of whether they are tangible or intangible. This concept, in turn, is the opposite of poverty. Since this is the lack of access to resources.

Regardless of the economic, wealth can be measured from a sociological, moral or even anthropological point of view.

Wealth is a concept of outstanding importance within the economic sciences.

How is wealth measured?

If we want to measure the wealth of a person, it is enough to make a calculation of what we know as his wealth. In this sense, the sum of all their assets, both tangible and intangible, represents, as well as the total assets of the person, their personal wealth.

However, when we talk about the generation of wealth, it wants to be measured for a territory or country, this measurement must be carried out through indicators that, such as GDP or GDP per capita, represent the generation of wealth, in a homogeneous way, of a population .

In turn, indicators such as national wealth are used, as well as another series of indicators that try to measure the heritage of a country, and, therefore, of its citizenship.

It should be noted, however, that GDP (approximation of wealth generated) is a flow variable, while national wealth is a stock variable.

Types of wealth

Wealth can be measured from an economic point of view, but it can also be measured from a moral, social or anthropological point of view. And, wealth is a concept that can have many meanings.

For this reason, we can highlight that there are other types of wealth such as the following:

  • Financial or economic wealth.
  • Social wealth or personal wealth.
  • Temporal wealth.
  • Physical wealth.
  • Moral wealth.
  • Intellectual wealth.

All of them refer to the abundance of resources that said person shows in the fields referred to by the type of wealth in question.

Types of wealth from an economic point of view

From a strictly economic point of view, wealth can be classified into two types:

  1. Gross wealth.
  2. Net wealth.

As we will see below, there are differences between these two concepts, although they are two completely different points of view.

Difference between gross wealth and net wealth

Wealth, in the field of economics, is defined as the set of goods, but also rights and obligations, that a natural or legal person, private or public, possesses.

For this reason, wealth, in the same way that it includes assets, also includes assets that have been acquired with liabilities.

Therefore, speaking of gross wealth, we are talking about the sum of all the elements, including, among these, also those that have been acquired with liabilities.

However, when we want to know the wealth that said person has, not including those debts that are computed in negative, this is calculated through net wealth. That is, the gross wealth, subtracting the liabilities represented by the debts and obligations with third parties.

In this way, we will be able to know what net wealth said person has.

Example of wealth

Among the wealth examples, we present below an example about economic wealth.

In this sense, let's imagine that we have an individual who owns a property worth $ 1 million, together with an equity summed up in the value of said home, along with an amortized vehicle that has a book value of $ 25,000.

His gross wealth, de facto, is one million and twenty-five thousand dollars.

Housing: 1,000,000 USD.

Vehicle: 25,000 USD.

Gross Wealth: $ 1,025,000.

However, let's imagine that such a home is being amortized through a mortgage loan. A loan of which a capital equivalent to $ 200,000 would remain to be repaid. In this sense, through net wealth, the person would have a net wealth of $ 825,000; having discounted the debts that subtract from said wealth.

Housing: 1,000,000 - 200,000 (debt) = 800,000 USD.

Vehicle: $ 25,000.

Net wealth: $ 825,000.

Tags:  banks cryptocurrencies Commerce 

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