Macroeconomic Policies

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By Natasha Jones
Business Studies
Macroeconomic Considerations
By Natasha Jones
Business Studies
Macroeconomic Considerations

Study of the behaviour of the whole (aggregate) economies or economic systems Lawnswood
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Study of the behaviour of the whole (aggregate) economies or economic systems Lawnswood
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My Report:
Macroeconomic Policies;
Macroeconomic policies examine the economy on a national or global scale, and also indicate the current status of the economy, (The economy involves all the wealth and resources that a country or region has). Moreover, it examines economy wide phenomena like, economic growth, unemployment, development, poverty and inflation. These factors paint a picture of the economy as a hole. The market value of all the official recognised goods and services is called the Gross Domestic Product (GDP); this is also an indicator of a countries wealth and standard of living. GDP measures the output in the economy. Unemployment

The unemployment rate measures the percentage of the total civilian labour force that is currently unemployed. The unemployment rate only involves those who are actively seeking work; this means that people who are retired or pursuing education are excluded from this rate. Workers who are not actively seeking work are called ‘discouraged workers’, and are not counted in the unemployment rate. The rate is an important signal of the overall economic health. The overall percentage of those who claim of benefits relating to joblessness is called a claimant unemployment rate. The measure does not take into account those without benefits who are jobless, so demonstrations an under estimate of the count of unemployed. Moreover, there are several different types of unemployment, which all transpire for different reasons; classical, frictional, structural. Some of the types of unemployment occur because regardless of the condition of the economy, cyclical unemployment for example, occurs when growth deteriorates. For instance, classical unemployment occurs when the wages are too extreme for employers to hire more workers. Increased wages may be due to laws of the minimum wage, or union activity. Frictional unemployment occurs when appropriate vacancies exist, but the time needed to search for the job, leads to a period of unemployment. Increasing numbers of people looking for work means that employers have a better choice. Although, this also means that people will less qualifications may find it harder to find work. More redundancy means people have less money to spend; consequently, there will be less demand on merchandise and products. Profits may fall if the lost sales revenue cannot get replaced. Furthermore, people who are unemployed generally have poor mental and physical health. There is also a relation with unemployment compared to the use of alcohol, drugs and crime. Plus, unemployment is an opportunity cost; this is because there is a loss of the output that a worker could have produced. A government also spends much more money on unemployment benefits to those who are redundant. This money, which is spent going on those who are unemployed, could be spent on other things like health care and education.

Inflation

Inflation is a sustained increase in the cost of living or the average or general price level leading to the fall in the ‘purchasing power of money’. (The purchasing power of money involves the retail price index and the index of average earnings). The cost of living calculates the change in the average cost of buying goods and services for a typical household. In the UK at the moment, there are two separate calculations of inflations; the retail price index (RPI) and the consumer price index (CPI). A difference between CPI and RPI is that CPI excludes payments on mortgage interest. Because of...
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