Fundamentals of Macroeconomics Paper

Topics: Economics, Inflation, Gross domestic product Pages: 2 (506 words) Published: May 15, 2012
Fundamentals of Macroeconomics Paper

Part I
Macroeconomics includes a variety of terms relevant to its study. The following terms help identify key factors that influence the U.S. economy. The Gross Domestic Product (GDP) is a measure of a country’s value based on goods produced, services rendered, government spending, and the difference of exports minus imports. The Real GDP is the measure of the output of GDP that is acclimated for inflation or deflation. The Nominal GDP is a little different in such that the change in price is not accounted for. Unemployment rate refers to the percentage of the American population that is eligible to work but are current jobless. Inflation rate is the percentage change in the increase of the price of goods and services. Interest rate is defined as the annual percentage divided by the principle balance owed monthly on borrowed money. Part II

Financial activities provide the infrastructure for the U.S. economy. In this paper we will analyze the effects of purchasing of groceries, a massive layoff of employees, and a decrease in taxes on the government, households, and businesses. We will also describe the flow of resources from one entity to another for each activity.

The government is one part of the equation that makes of macroeconomics. Their financial activities may arguably have the greatest effect on our economy because their decisions affect the whole nation. When consumers purchase groceries they are in turn buying into the factor market system. The government has levied state taxes on the import and sale of groceries. This increases the federal treasury. A massive layoff of employees hurts the government because it is less money going into the treasury, raises the interest rate, and decreases the U.S. market value by that much. A decrease in taxes also decreases government revenue but it promotes consumers to spend more.

Households play a vital part of the economic system. Buying groceries provides the needed...
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