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Eco 372 Week 2 Fundamentals Of Macroeconomics

1012 words - 5 pages

Fundamentals of Macroeconomics

Fundamentals of Macroeconomics
The economy is nothing if not extraordinarily complicated. It is intertwined with everything and almost seems as if Newton’s third law applies to it as well. Even the smallest of matters can have a large implication across the economy. The butterfly effect also comes to mind. This paper will evaluate a few of the common activities that can happen within a society, and how those common activities can affect the home, business industry, and government.
Purchasing of groceries
Grocery prices are on the rise. Not long ago diesel fuel was $4.00 a gallon. This is the method in which all groceries ...view middle of the document...

However, if it is good for businesses it is generally good for the economy, which in turn is good for the government. The general wellbeing of the economy is of vital importance for the government. However don’t fret for the government not making money. Businesses pay taxes on their profits whether they sale groceries or other items. So the income tax generated from the businesses will directly affect the government. While the government isn’t making money of the residential sale, it can make money from the commercial sale and profit.

Massive layoff of employees
This is bad on many levels and good on a few too. In 2008 there were many auto manufacturers laying off employees and shutting down plants. We can see what happened vividly. When unemployment increases it causes a strain on all local businesses. The employees who were laid off can no longer spend the money they want to spend because their household has less to no income. They become frugal in their lifestyle and business get hurt simply because no one can afford to buy their product. This can in turn cause more layoffs and even more frugal spending activity. It doesn’t take long to see a trend develop which causes a recession and possibly even a depression. It should be noted that the company that laid off the employees in the beginning, may see a noticeable savings in the short term, but in the long term their business will be affected by the recession that their layoff started.
So it is in the best interest of the government to avoid these things if at all possible. If the people are unemployed, there is no income tax. If people can’t afford to spend money, there is no sales tax. It also leans heavily on the social services in these situations. Many people drawing unemployment will increase the outflow of money for the government. It is important to remember that when money stops circulating, economies die...

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