Fundamentals Of Macroeconomics Paper

Fundamentals of Macroeconomics

Week two objectives analyze the impact of various factors on aggregate demand and supply; in addition to evaluating the effectiveness of changes in fiscal policies using Keynesian and Classical models. This paper will explain the following terms: gross domestic product (GPD), real GDP, nominal GDP, unemployment rate, inflation rate, and interest rate. As well as describing the effects of purchasing of groceries, massive layoff of employees, and decrease in taxes have on the government, households, and businesses. The flow of resources from one entity to another for the economic activities listed above will also be explained. The most commonly used indicator of economic health of a nation is the GDP. GDP
Nominal GDP is the total economic value of products produced within a nation during a specific time. However, unlike real GDP, nominal GDP does not adjust to reflect the increases or decreases of price level. Nominal GDP can be slightly misleading because when inflation is not included in the GDP amount, it appears higher than it really is. Another contributing factor of GDP is the unemployment rate. Unemployment rate is the proportion of a population whom is able and actively seeking employment but unable to find work. When the economy is growing or expanding the unemployment rate usually drops; however when the economy is in a recession unemployment rises. For example, since 2005 the unemployment rate in Las Vegas, NV, has range from 3.8 % in May 2006 to 15.1 % in July 2010. As of June 2013 the unemployment rate for Las Vegas, NV, was recorded as 10.4 percent (Homefacts, 2013). Although the rates have decreased since the last recorded rate of 15.1 %, we are still in a recession. However, because of the long-term downturn in economic activity in more than one economy there may be a possibility of an economic depression
Beginning with purchasing groceries effects on a households. The effect depends on the size of the family and the amount of groceries needed. A large family means a large grocery bill. As with groceries and most everything else taxes must be paid when making a purchase. The higher the taxes are the less food families buy which effects both the government and businesses. If consumers are not spending, the stores sales go down, the suppliers lose too because the stores are ordering less product, which could cause businesses to shut down or layoff employees. Massive layoffs has a huge effect on households. During massive layoffs families are affected directly and almost immediately. The loss of employment can cause a family to lose their home, car, sanity and will to move forward. This affects the government because unemployment benefits has will have to be paid out as well as providing health coverage and food assistance to those families in need. Business are also affected because without sufficient employees the business is unable to run