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Fundamentals of Macroeconomics Paper

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Fundamentals of Macroeconomics Paper
Alyssa Arellano
ECO/372
August 25, 2014
Yohannes Mariam

Fundamentals of Macroeconomics Paper The fundamentals of macroeconomics affects how the whole world operates, affecting everyone’s lives in one way or another. “The U.S. economy can be divided into three sectors: household, businesses, and government” (Colander, 2013, p. 55). Economic activities such as purchasing of groceries, massive layoff of people, and decrease in taxes play a vital role in how the flow of resources interconnects from one entity to another.
Purchasing of Groceries The purchasing of groceries has many effects on the economy as well as in households and the government. The purchasing of groceries affects households because it is an element that is needed and one cannot live without, making it impossible to ignore. Thus, households interact with businesses and the government in many forms. First, households supply economic resources such as labor, and other factors of production to gain income to purchase goods (the purchase of groceries) is called the factor market, and services that businesses produce to sell is known as the “factor market” (Colander, 2013, p.55). Furthermore, businesses rely on households to determine what and how much to produce, because if they over produce and households do not purchase the production, then they will have to sell the items at a mark down price in order to meet the demand of product known as the “goods market.” The money that flows from households to businesses transforms into what is known to the economy as consumption. That money then goes into the financial system of the economy rising GDP. However, when price levels rise or inflate or production does not sell, households begin to construct or substituting certain foods for others that are not high in price. This will then affect the

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