Fundamentals of Macroeconomics
Macroeconomics studies the aggregate behavior of the economic system as opposed to microeconomics whose concentration is on subcategories or individuals and how they make decisions. The use of macroeconomics can have a direct impact on the choices made for the nation’s economic benefit. When employing macroeconomics an economist can determine why products have decreased or increased in price. It analyzes many factors that play part in the health of the economy. This study, though, complicated can be employed to encourage different government policies that develop a certain affect for instance; increased government spending can create jobs ...view middle of the document...
However, if the inflation rates go up and prices increase the consumer would need more than $2 to purchase two candy bars. Even an increase of a nickel will add up if all items increased a nickel. If the consumer bought 50 items at a five cent increase the consumer would be spending an extra $2.50. At that rate the candy bars may become an item that is not purchased because of inflation. Interest rates are the percentage charged on borrowed money. For instance if a borrower borrowed $10 at 10% interest one-time repay, that person would owe the lender $11.
Many activities are involved when determining our economic health. Whether someone has a job or not or how people shop and pay their bills are all indicators of how the economy is doing. Purchasing groceries is a direct relationship to the economy and affects households, government, and businesses. How we buy whether or not we can afford different foods. Supply and demand are important when purchasing food and can determine the cost of food and food choices. If people cannot afford food they may receive assistance from the government. This in turn affects our taxes, with increased taxes more money is spent on paying taxes rather than on consumption. Businesses must stay price competitive to stay in business. If they cannot keep the flow of supply and demand going they are in danger of losing business. If a store does not have the buying power or the resources that other stores have they can go out of business. Going out of business affects the aggregative economy and increases the need for government aid who in turn must borrow money to put back into the economy; this creates a larger deficit.
Unemployment and layoffs are also indicators of potential economic troubles. In 2008 when the economy went into a slump there were massive layoffs throughout the country. Many people lost their jobs and went to the unemployment office to receive help through the difficult times. People lost homes, cars, and the ability to pay their bills. This affected many businesses, especially lenders who had initially loaned the money for the purchases. Consumers, who were unable to pay their loans at the time, nearly brought the banking industry to their knees and shook the economy, the government had to step in and give money to some of these banks, and this in turn affected the deficit but seemed to help the situation. Households could no longer afford to spend the money they use to spend...