Fundamentals of Microeconomics
Macroeconomics Part I Gross domestic product (GAP): GAP is the monetary or market value of all goods and services produced in a country during a specific length of time. Real GAP: Real GAP is the total measurement of how much a country has produced within a year.
Real GAP takes in account inflation and deflation and adjusts accordingly to the existing and real value of the total goods and services produced Nominal GAP: Nominal GAP does not make allowances or take into account changes and fluctuations caused by inflation or deflation when calculating the worth of goods ND services a country has manufactured. Nominal GAP is also calculated at current price for that month or quarter unlike real GAP. Unemployment Rate: Unemployment rate is the the percentage or indicator of the labor force that is without gainful employment during any period of time.
Inflation Rate: Inflation rate is the percentage of increase in prices of goods and services over a given period of time. Interest Rate: Interest rate is the rate or ratio at which interest or a fee is paid by borrower for the use of borrowed money. The interest rate is generally a percentage f the principle paid out over
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The Gross Domestic Product or GAP is an economic indicator used to measure economic activity and can determine how these actions affect government, households and businesses. The following three activities though seemingly random have an impact on GAP and the economy. Purchasing of groceries The purchasing of groceries helps the economy in several ways. It helps the government with import and export relationship with other countries. Many of the items found in the local grocery stores were imported from different countries. The U. S.
A purchases from other countries with the understanding that these other countries will purchase goods from our country, which helps to stimulate the economy. Purchasing groceries also helps households take control of their purchasing power to buy the wants, needs, and necessities of the family. This seemingly simple activity positively affects the economy. And last but not least purchasing groceries helps the economy by employing dock workers, cashiers, stock operate. Increased revenue in a grocery store means increased business which increases the need for additional personnel to meet the demand of the consumers.
If the household does not exercise their purchasing power more food will remain on the shelf which will decrease the need for food to be imported from foreign countries. The economy will become stagnate because there is no output of funds, and the grocery stores will have to lay off employees or institute a hiring freeze cause the revenue does not meet the expenditures. It is supply and demand at its most basic form. Massive layoff of employees The massive layoff of employees is an economic activity that is detrimental to the economy.
For the government it means cut backs on different funded programs because larger portions will be paid out for unemployment benefits. These payouts have the capacity to cause a financial crisis for the nation. Massive layoffs will also mean that homeowners can lose their homes and no longer meet their credit obligation which not only affects the households but also the government because it increases the nation’s deficit which is already over a trillion dollars. It only takes one layoff to affect the quality of life in a household. A layoff changes the way a family spends money.
Disposable income has been eliminated and providing basic necessities for the family can become struggle. Foreclosure rates rise, and output of money decreases which is not only hard on a household but a community and the economy. Massive layoffs in one industry can have a domino affect in others. In the town of Roxbury, North Carolina a manufacturing plant closed causing half of the own to be unemployed. Soon after the plant lay-off the daycare and the car dealership closed because they were no longer receiving business from the employees of manufacturing plant.
Layoffs do not only change the life of one person, it has a ripple effect. Decreases in taxes Decrease in taxes can be both beneficial and detrimental to the economy. The decreasing of taxes will have a negative effect on the government because it would mean less revenue coming in. On the other hand a decrease in taxes will have a positive effect on households because it will increase disposable funds and allow ore spending opportunities for households and families. Increased funds mean that more goods and service will be purchase which will stimulate the economy and provide much needed economic growth in the U.
S. A decrease in taxes will be beneficial to businesses because the overall cost of their products will be lower. Lower prices give consumers more confidence in their spending power which leads to more purchases, more Jobs, and expansion and investment opportunities which improves the economy and the growth of the GAP. Economic activities occur on a daily basis many times without the average citizen’s knowledge. The decisions the government make about the U. S. Fiscal actions can cause economic growth or financial disaster to an entire nation.