Fundamentals of Macroeconomics Paper
This paper will include definitions of terms used in economics or macroeconomics as well as scenarios related to economics and how these terms and scenarios work together. Understanding these terms are important to doing business in today’s world and can help one gain a clearer picture of how things work in terms of money. Monetary rules help make life a bit easier by avoiding chaos, even if there are some that do not agree.
One term used in economics is gross domestic product or GDP. GDP is defined as the final count on products that are manufactured within a given country and under a certain time period. The GDP includes products consumed for public ...view middle of the document...
These prices for goods and services already include changes within the market and are not re-adjusted for inflation or deflation.
Unemployment rate defines the amount of people that are not currently employed and are actively looking for work. When this rate increases, the economy is becoming weaker which could lower interest rates. Inflation also increases which then causes interest rates to rise again.
Inflation rate is the average price on goods or services that rises and the power to purchase decreases. An example would be banks that try to prevent and discourage severe inflation so they can keep excessive growth of prices below average. The increase in this rate is usually calculated annually, but can also be requested monthly.
Interest rate is the percentage of the amount charged or borrowed for assets. This is also known as an annual percentage rate (APR). High risk borrowers are charged a higher rate due to past experiences, late payments, nonpayment’s, etc. Lower risk borrowers are charged lower interest rates due to the lender having more trust and faith that the money borrowed will be paid accordingly.
The three activities that will be analyzed are purchasing of groceries, massive layoff of employees, and decreases in taxes. The purchasing of groceries affects the government in that it allows them to see where and how much of these types of products the consumer is buying. This is important because it affects how the government can view the overall wellbeing of the state or country. It also shows how successful certain types of businesses are who sells these products. Purchasing groceries are important to households because the price of the goods can be regulated by taxes those businesses have to pay for existing. The price of gasoline which can be regulated by the government can also affect the price of the goods to people living in households and in turn, will affect how much and where they buy them. As mentioned earlier, this action affects businesses because however much is purchased depends on how much that business decides to get in or charge for that product. All of these actions are interlaced and related. A business purchases goods at...