Consider the following examples of economic activities:
• Purchasing of groceries
• Massive layoff of employees
• Decrease in taxes
Describe how each of these activities affects government, households, and businesses. Describe the flow of resources from one entity to another for each activity. Relate at least one current event to the activities.
• Inflation rate
It is based on the rising price of good and services and falling purchasing power. This measurement shows how fast currency loses value. This is calculated by how fast prices for goods and services rise over time, or how much less one unit of exchange buys now equated to one unit of exchange at a given time in the past. • Real GDP
Real variable, such as the real interest rate, is one where the effects of inflation have been factored in. Real Gross Domestic Product measures the worth of all the goods and services produced stated in the prices of some base year. • Nominal GDP
A nominal variable is one where the effects of inflation have not been accounted for. The Nominal Gross Domestic Product measures the worth of all the goods and services produced stated in current prices.
Macroeconomics is perceived as a relatively new concept considering the lack of interest in studying the economy before the 1930s. However, a specific terminology was created that dealt with the problems that is faced by the economy daily. That has aided in a better understanding the differences between macro and microeconomics. Macroeconomics speaks of the aggregate economic facotors and entails employment, interest rates and gross domestic product of nations. Purchasing of Groceries
The amount of money spent in each household differ based on the size and specific needs of the family. A larger family will have a higher grocery bill in most cases. The government palys a major role because grocery items are taxed and will dtermine how much groceries families may be able to purchase. Businesses are also affected by consumers’when sales decrease due to their inability to shop due to price increase. This will bring in less revenue for the business. Massive Layoff of Employees
A massive layoff is an unpleasant occurrence for all involved. This is an indication of the economic state of the company as it implies downsizing of the company. In this situation, the company will impose more responsibility on the few workers that they do have. They would not be able to operate sufficiently. This would impact households this represents a decease or complete (cut) in income. The standard of living of affected households will drop as a result of being laid off. The government will also be affected by massive layoff of employees due to the them having to pay unemployment to these individuals.