First Draft of Fundamentals of Macroeconomics Paper Essay
First Draft of Fundamentals of Macroeconomics Paper
There are a lot issues that actually affect our economy, such acts as gross domestic product, nominal GDP, real GDP, inflation rate, unemployment rate, and as well as interest rates. These areas actually has massive power regarding the way we purchase groceries, if there will be a large amounts of layoffs to workers, and decrease in taxes. Gross Domestic Product is defined as the market value of services and goods that are made in the country in one year. This is an indication of the normal living situation in a country. On the contrary, real GDP is a nation’s total output of goods and services adjusted for price changes. Nominal GDP is the gross domestic product without inflation adjustments. Unemployment rate is a fraction of the whole workforce who are unemployed and looking for work. Inflation rate is the amount increase by percentage that products & services increase on an annual basis. Interest rate is the amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets.
These factors are relevant to our lives and how we manager the money we have. Purchasing food sounds like an easy thing to do but if you are limited on money, it can be very stressful. The price of food affects the government. Products are produced and sold within our country; this affects GDP, real GDP, and nominal GDP. This is precisely relevant to buyers spending and during periods of recession, buyers ease up on spending and decide to save. Once consumers venture into savings mode, all business will be effected because production is down and this could cause layoffs. Purchasing food affects homes due to the fact that a lot of people have a hard time trying to provide for their families and when the cost of goods constantly goes up but wages don’t this makes it really difficult to live. Massive layoffs affect people’s standard of living and that is what the GDP is centered around. Having to many layoffs can have a dramatic effect on the unemployment status which causes the economy to have a higher unemployment rate which causes salaries to go down so what their spending is down.
Massive layoffs has a vicious cycle and globally in 2012, 200 million people were without employment and this shows the slowdown in employment growth, which means companies are were not hiring and people were not spending like they use to. Massive layoffs affect the economy dramatically because it has a huge impact on consumer spending which in my opinion makes the world go around. If no one is buying then production is down and that’s how layoffs happen, and this affects households, businesses, and the government. Tax decreases can stimulate economic growth because if people are paying less in taxes, they have more money to spend. It has been proven over the years that tax decreases generate economic growth and federal revenue will always rise.
On a personal note, I sometimes spend more during tax season because I usually get back a good return because I qualify for various tax breaks. These affect my household because I have more disposable income. Tax decreases can help a business if their taxes are decreased the organization will payout less and have more income. As we compare GDP, nominal GDP, real GDP, unemployment rates, inflation, and interest rates, it is obvious that all of these factors affect us every day. They show how we spend our money and these factors give indications of recession.
Buying groceries, layoffs, and tax decreases are all a reflection of these factors. Daily acts, such as, buying groceries has huge impact on our economy because it is directly related to consumer spending, which is a driving force. Massive layoffs affect our households, business, and government because this causes consumer spending to go down. Tax decreases on the other hand has a positive influence on all six factors. Plus it will benefit your household, business, and the government.
Colander, D.C. (2010). Macroeconomics (8th ed.). Boston, MA: McGraw-Hill/Irwin http://www.forbes.com