Fundamentals of Macroeconomics Paper
The Gross Domestic Product (GDP)
This is used to measure the total market value of all goods and services. The value is measure against the total amount produced within a country in a year or over a period of time. There can be issues with the accuracy of the calculations, because the Government receives the data which only analyzes the output of goods and services that were reported. There may be circumstances where companies may be relax on reporting their data, which will result in the Government receiving inaccurate analysis on the healthiness of our economy. This analysis also, helps the Government understand the degree of concerns our economy may be heading toward, so an adjustments can be made to strengthen, maintain current path or slow it down, to prevent damages to the economy. The adjustments on the interest rates are important as this can determent the path of our economy over time so the United States can remain strong and our economy will remain healthy. Real
This is a term used to show the final value of the economic market based on the current economy. It also shows the true value of goods and services offered within a particular year, which includes the adjustment for measuring the inflation increase. Nominal (GDP)
This measures the total market value of goods and services at the current prices based on the market value. The price of Goods and services may encounter changes in the market, and the Nominal takes this into account although, doesn't include the inflation.
The rate shows how many people that are not currently working, so if in 2013 there are an 8% unemployment rate, which means 8% of the population are collecting unemployment. This rate defiance how strong or week the economy is at a point in time. If the rate in 2013 is 8% and in 2014 is 6%, this shows the government that the economy is improving because the unemployment has decreased. This rate can be used to outline where and what needs to be adjusted to strengthen or weaken the economy. It is an important tool that can be used to quickly determine the status of the economy. If the consumers are not spending the unemployment rate will show an increase, which affect the companies financially. This means the companies are not able to produce products and services because customers are not purchasing. Inflation
This is an increase in prices over a period of time for goods and services, when this accrues the consumers pays more to receive less. There can have negative or positive effects on the economy. The negative side of this is the consumer has less money to spend to purchase goods and services. it can increase the unemployment rate as company is making less profit. In most, cases the inflation will take effect and companies don’t increase their staffs pay to offset the increase, which will have a negative impact in the economy. It also, has an impact of investment and saving as their return on their investments decrease, because the interest rates drops and investors don’t purchase company stocks. There is also, a lost for the company as investors are not supporting their companies with growing their stock. The positive effect is that banks can adjust their real interest rate to attract investors to start capital projects to work toward simulating the economy. Interest rate
The interest rate is a fee for borrowing funds to purchase items or pay bills and the fees are paid to the Financial Company on the amount that is borrowed. In turn the financial company pays interest on the deposits the consumers puts in their account, so the financial company can invest the deposits to lend out to other customers, invest into the stock market or deposit into the Federal Reserve. The interest rate is adjusted to the healthiness of our economy. The government will increase or lower the rate depending with the economy is moving slow or fast. There is a percentage of the principal that is charged to determine the amount of repayment over a certain period of time. When borrowing money the lender will determine the rate on the amount of risks and the person credit history for the repayment of other lenders or the collateral that the lenders can sell to collect the money for repayment of the borrowing money. Purchasing of groceries/ Massive layoff of employees
The Gross Domestic Product, Nominal, Real, Nominal, Unemployment rate, Inflation rate and interest rate plays a big roll in purchasing of groceries and massive layoff. If consumers are not working groceries stores have to increase their cost to make up for the loss of profit because the consumers are buying only enough to survive and buy a lot less then they unusually will and layoffs will start to increase. This is a chain affect simply because families start to applying for government assistance to feed their family’s and having a high unemployment rate means less people working, which result in less people paying taxes. This means that our government expanses are increasing and their funds are decreasing as they start to give more food stamps, unemployment benefits and medical insurance as stores start closing their doors resulting in more lay off and less taxes. Decrease in taxes
This will help families have more money to spend in the economy and means the economy is moving slowly. Although, the decrease in taxes will give less funs to the government to offer programs to help the consumer get back to work. The government needs to stimulate the economy and less taxes being collected makes this challenging to accomplish.
University of Phoenix. (2010). Macroeconomics. Retrieved from University of Phoenix, ECO 372 University of Phoenix. (2010). Macroeconomics. Retrieved from University of Phoenix, ECO 388-389