Fundamentals of Macroeconomic
Macroeconomics illustrates a wider picture of economies. Macroeconomics studies how human economies work on a large scale. Business produces products and services for consumers to purchase. After that governments adds concepts for instance, taxes and inflation to these services and goods then they move through a market. Macroeconomics is the study of this as a whole. In other words, it is the study of the economy, but from a wider point of view. Macroeconomics is really more of a new concept when it comes to economies. Right around the 1930, economists made the decision to part economics into two groups. The first is Microeconomics and the next is Macroeconomics. Both give a good view on economies, but one focuses on small details for instance, individual decisions, and the other focus on the bigger picture for instance unemployment and inflation. Both show the benefits the governments, business and the household. There are many concepts connected to both, but when dealing with Macroeconomics it important to understand some key items. These items are Gross domestic Product (GDP), Real GDP, Nominal GDP, Unemployment Rate and inflation rate.
Gross Domestic Product or also known as GDP is an economic measurement that shows the relationship between money made from all goods and services produced over a specified period of time. This is usually figured annually over a year. The GDP is used by countries to illustrate the health of a given economy. This is the most common form of measurement used by economists. It can show the growth or decline of an economy by the means of good and service sold through that period of time. It is very important to understand because it shows the health of any economy and where it can improve.
Real Gross domestic product is the total value of the GDP adjusted after inflation and deflation. Real GDP is really used to compare different time periods to see what changes were made if any, for example the previous to the most current years to see if the economy is making improvements. The really idea is that the value of the dollar changes, so that must be accounted for.
Nominal gross domestic product is the unadjusted GDP total value before other factors come into play, for instance inflation and deflation. This is used to estimate market total value. Nominal GDP does not account for changes in prices over time. In short form the nominal can be used as a snapshot of a period of time to illustrate Data. It more or less can show if the economy has growth in the way of money or a dollar amount.
Unemployment rate is a measurement and/or statistic, which determines a percentage of people currently unemployed that are willing and able to work but are not because of outside factor known as the economy. This shows a direct connection to the health of the economy. It will show if the economy is in an expanding or a recession.
Inflation rate is used to show the growth or increase in prices on product, goods and services. In other words it illustrates an ongoing price change on goods and service across the broad. Inflation rate is set in place by monitoring a good or service over a period of time to see on the price level changes. In does not watch just on time price change but rather show the rate of change over long period of time.
The U.S. and other economies around the world are divided in to three groups; government, households, and businesses. Businesses are set in place to make products, goods and service in turn sell these items to government and households. Government purchases labor services form households and also buy goods and service form business. Households provide working individuals for businesses and aid in production and are also employed by the business. With that stated it shows the relationship between all three groups and illustrates their interworkings. There is one more part which is the government taxes both households and businesses. In one way or another they interact with one other to create an economy.
Purchasing groceries is a way of showing the relationship of these three groups. It is economic activity, in which all three groups will show an involvement with one other. To illustrate the effects the household will start off by providing employees for business. Next the employees make products to be sold to the government and other households. The government puts in place taxes on these goods and service and will also purchases the goods and service. Households do not just provide labor for business, but they will also purchase the products made by the business. When all three groups are doing their part it allows the other group to do their and keeps the process going.
A massive layoff effect more than one would think. Massive layoff can hurt all three groups and cause a decline in profits and products for all. Households would lose the labor that they provide making money less. Businesses would lose revenue, which can affect many concepts in a business for instance a decline in production. The government would see a decline in taxes revenue which affects many across the board. This in turn would affect their spending to business and households. Decrease in taxes can change things too. It may help business and Households in the short term, but it would damage Government all together. Households would see increases in revenue and less in taxes to pay on services and goods that are needed. The businesses would make more revenue from household but may see a decline in government spending. On the other side businesses would not have more money because they would not have to pay taxes on levels like they were before. Governments would be the one that really get hit hard. Lack of taxes would not allow them to provide any services or buy any goods or service. Economic activity is important from all three groups. It seems to keep the ball moving in a smother manner with one of them missing. Each one of them affects the outcome of the other. Each one must perform their task so the other can perform theirs. If one changes their actions it directly affects the way the other act and in turn it will come back to affect them.