Fundamentals Of Macroeconomics Essay

1074 words - 5 pages

Fundamentals of Macroeconomics
ECO/372 Principles of Macroeconomics
January 6,2014

Fundamentals of Macroeconomics
Economics proposes that we live in a world of scarcity. We do not have enough resources or time to meet our needs. Economics studies how we allocate our resources to achieve those needs. Macroeconomics deals with the entire components of a country’s economy. Macroeconomics can be called the “big picture” of economics at a national level. Rather than focusing on individual markets, macroeconomics looks at production and consumption of the economy as a whole. The most important basics of macroeconomics include gross domestic product, real gross domestic product, nominal gross ...view middle of the document...

The unemployment rate is calculated by dividing the number of unemployed people by all of the individuals in the labor force. Unemployment means people that are without work but looking for employment. If someone is not looking for employment or is unable to work because of other reasons (health, disability, retirement) they are not included in the labor force.
The inflation rate is the rate at which prices are rising and purchasing power is falling. For example if the inflation rate is 2%, then an item that cost $1.00 this year will cost $1.02 next year. Inflation changes for various reasons but two main thoughts are accepted. If demand is growing faster than supply, prices will usually increase. If the suppliers cost rise, then cost of their products will usually rise.
The interest rate is the rate at which interest is paid. Someone borrowing money pays a fee to use the money of the person lending. This amount is usually a percentage of the amount borrowed over the period of one year. It is calculated by dividing the amount of interest by the amount of the principal.
PART II
Economic activity describes the economic environment of an economy. This includes inflation, interest, competition, unemployment, and taxes. Economic activity affects individuals, governments, and businesses in a variety of ways. This paper will discuss three areas: purchasing, unemployment, and taxes.
The purchasing of groceries affects every person and household. Enough food must be purchased to satisfy every household member. If a limited amount of funds are available, the household may have to forgo higher end products. For example, ground beef may need to be purchased instead of steak. Store brand products may be preferable for the consumer over name brand items. This could adversely affect the grocery store because they will not be able to make as much profit on lower cost items. However, it could help the grocery store if it causes purchasers to buy more generic store brand products. Businesses would need to remain competitive with other stores to attract consumers. Some households may require government assistance to purchase food products. Government assistance results in higher taxes to be able to provide that service. The higher taxes would be passed on to...

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