Eco 372: Fundamentals Of Macroeconomics
Fundamentals of Macroeconomics David Hanke ECO/372 August 19, 2013 Paul Updike Fundamentals of Macroeconomics Macroeconomics deals with the study of the economy as a whole, rather than that of individual markets. It takes into consideration how the variances and changes in prices, wages, policies, expectations, etc. throughout the economy influence the supply and demand of the economy in its entirety. There are many facets and many different aspects of the economy and the factors that influence it. The gross domestic product (GDP) is the market value of all the officially recognized goods and services produced within a country at a given point in time.
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Unemployment is a critical factor when looking at the economy. Unemployment occurs when people are without work and actively seeking work. The unemployment rate is determined by dividing the unemployed individuals by the total of all the individuals in the labor force. Usually when the economy is in a recession or is a slump, the unemployment rate is higher. Inflation plays a significant factor in the economy as well. Inflation is the rise in prices of goods and services over a period of time. The higher the inflation rate, the higher prices go. Interest rate is the rate in which interest is paid by borrowers to lenders providing them money or goods on …show more content…
This is obviously something that the government would decide and put into effect. A decrease in taxes could be a response to the previously mentioned scenario of a massive layoff. As the unemployment rate would go up, the spending would most likely go down, therefore negatively affecting the economy. One way the government can help ensure that spending stays the same, or decreases minimally, is to decrease taxes. If the government did not decrease taxes, and the unemployment rate either continued to go up, or stayed high for an extended period of time, it would influence spending. This decrease in spending would affect business as they would be selling fewer goods and services that would turn less of a profit. Government lowering taxes can help the households by lowering the costs to purchase goods and services. Government lowering taxes would affect businesses by making it cheaper for them to obtain the goods and services that they would turn around and sell to
Unemployment is a critical factor when looking at the economy. Unemployment occurs when people are without work and actively seeking work. The unemployment rate is determined by dividing the unemployed individuals by the total of all the individuals in the labor force. Usually when the economy is in a recession or is a slump, the unemployment rate is higher. Inflation plays a significant factor in the economy as well. Inflation is the rise in prices of goods and services over a period of time. The higher the inflation rate, the higher prices go. Interest rate is the rate in which interest is paid by borrowers to lenders providing them money or goods on …show more content…
This is obviously something that the government would decide and put into effect. A decrease in taxes could be a response to the previously mentioned scenario of a massive layoff. As the unemployment rate would go up, the spending would most likely go down, therefore negatively affecting the economy. One way the government can help ensure that spending stays the same, or decreases minimally, is to decrease taxes. If the government did not decrease taxes, and the unemployment rate either continued to go up, or stayed high for an extended period of time, it would influence spending. This decrease in spending would affect business as they would be selling fewer goods and services that would turn less of a profit. Government lowering taxes can help the households by lowering the costs to purchase goods and services. Government lowering taxes would affect businesses by making it cheaper for them to obtain the goods and services that they would turn around and sell to