...Product Purchases and the Economy Jose Velasco ECO/372 November 9, 2015 Matthew Mulyanto Product Purchases and the Economy Macroeconomics is a helpful resource for enabling understanding of factors that affect shifts in supply and demand and pricing of products. Macroeconomics can provide an understanding, for example, of how indicators such as inflation and interest rates can reflect the state of the economy, revealing its relative strengths or weaknesses. Information such as this can be extremely useful in determining whether one should buy a product such as a home, which would necessitate a mortgage and monthly payments. Economic Indicators and the State of the Economy Two economic indicators that reflect the strength of the economy are the inflation rate and interest rates. A stable and low inflation rate, for instance, is viewed worldwide as a necessary means to keeping the economy strong. Banks worldwide, including the U.S. Federal Reserve, the Bank of Japan, and the European Central Bank have published directives stating their primary objective for monetary policy as being “to maintain price stability” (Federal Reserve Bank of San Francisco, 2006). Others, such as the Bank of England, the Bank of Canada, and the Central Bank of Chile, have a similar goal to “keep inflation low and stable” (Federal Reserve Bank of San Francisco, 2006). Maintaining a stable inflation rate allows governments to strengthen their economies by ensuring...
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...Product Purchases and the economy Anthony Norman ECO372 January 25, 2016 Steven Karp Product Purchases and the economy Consumers, such as myself are using more caution when it comes to determining whether or not we should invest in purchasing a new home. There are numerous factors to consider before buying a new home that for example the price and location. I must partake in the necessary research to know what lies ahead for me when it pertains to budgeting and making monthly payments on a new mortgage. The wellbeing of the economy can be a game changer on whether or not I should make such a huge investment as purchasing a new home. Two important economic indicators, which will aid in helping me to determine if buying a new home will be a wise and sound investment, are the interest rates and housing start. Economic Indicators According to Investopedia (2015), an interest rate is the sum charged communicated at a rate of essential, by a loan specialist to a borrower for the utilization of benefits. Interest rates are often shown on a yearly premise, known as the annual rate (APR). The interest rate affects the affordability of buying a home. If the rate increases by 1%, it will have a significant impact on my monthly payment. For example, if I am looking to purchase a home that cost $400,000.00 at an interest rate of 3.0%, I am looking at a mortgage of $1,686.00. If that interest rate were to increase by 1%, my monthly payment would increase by $223.00 with a monthly...
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...Product Purchases and the Economy Jessica Cross ECO/372 3/28/2016 Kathleen Byrne Product Purchases and the Economy A lot of times in life there are things we come across that we think we may really want but do no necessarily need at the moment such as a new home, a car, smart phone, or even a kitchen makeover of your dreams. Whatever it may be it is small in no way and most certainly requires budgeting. For instance, if I wanted to purchase a new car I would most certainly want to see what standings the economy is in, and if I would be able to actually afford my purchase over a period of time. Budgeting your money is a great way to ensure that you always have the money for the important things in your life therefore, it is great to see what shape the economy is in before you go out spending that hard earned money on something that you may not absolutely need at the moment or possibly won’t be able to afford over a longer period of time because of the shape of the economy (Bell, 2009). Reflection of the Economy There are indicators that reflect how the economy is doing. Some of these indicators are real GDP, unemployment rates, inflation rates, and interest rates. The two that I feel are big indicators in the economy’s strength are interest rates and unemployment rates. Interest rates are portions of a loan that are charged back to a person for the amount of money that they borrowed. The interest rates are usually added to the payment that the person will be paying...
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...Product Purchases and the Economy ECO/372 October 12, 2015 Product Purchases and the Economy A new car purchase is one that takes a large amount of consideration and budgeting. The most important economic indicators to consider when investing in an automobile purchase are unemployment rates and interest rates. These indicators will assist a person when deciding whether to purchase new or used. Is the right time now or later to purchase a truck? Economic Indicators The automotive sector is a cyclical business. Since it is a cyclical business, changes in the revenues and earnings of automotive companies are more likely due to the state of the economy and the strength of the consumer. Sales in the automotive sector are higher when economic activity is strong and people feel confident about their future economic prospects. In this environment, more people are likely to make an automobile purchase. Clearly, unemployment is a major factor in this environment. People do not feel optimistic about a major purchase when they are unemployed. People without jobs are less likely to have the means to afford a car. Someone with a job is not likely to make a major purchase if he is worried about losing his job. In 2009, the unemployment rate was between 8% and 10%, and auto sales were 9 million on an annualized basis. In March 2015, the unemployment rate was 5.5% and auto sales were 16 million. Interest rates affect the financing costs of purchasing...
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...Sunday, 11/04, at 11:59pm. Problem #1 The sweetTooth Candy Company knows it will need 10 tons of sugar 6 months from now to implement its production plans. Jean Dobson, SweetTooth’s purchasing manager, has essentially two options for acquiring the needed sugar. She can either buy the sugar at the going market price when she needs it, 6 months from now, or she can buy a futures conntract now. The contract guarantees delivery of the sugar in 6 months but the cost of purchasing it will be based on today’s market price. Assume that possible sugar futures contracts available for purchase are for 5 tons or 10 tons only. No futures contracts can be purchased or sold in the intervening months. Thus, SweetTooth’s possible decisions are to (1) purchase a futures contract for 10 tons of sugar now, (2) purchase a futures contract for 5 tons of sugar now and purchase 5 tons of sugar in 6 months, or (3) purchase all 10 tons of needed sugar in 6 months. The price of sugar bought now for delivery in 6 months is $0.0851 per pound. The transation cost for 5-ton and 10-ton futures contracts are $65 and $110, respectively. Finally, Ms. Dobson has assessed the probability distribution for the possible prices of sugar 6 months from now (in dollars per pound) in the following table: |Price |$0.078 |$0.083 |$0.087 |$0.091 |$0.096 | |Probability |0.05 |0.25 |0.35 |0.20 |0.15 | a. Given that...
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...2013 Johnny Shull Abstract This paper will review and describe gross domestic product, real gross domestic product, interest rates, inflation and unemployment. This paper will also review the decrease in taxes, massive layoff, and the purchasing of groceries and how they affect households, businesses as well as the government. Everything what happens within an economy sets off a chain reaction whether its big or small. One negative reaction could lead to a whole line of negative reactions which impacts consumers, businesses, and the government and vice versa for the positive impacts. Economic Activities Gross domestic product (GDP) measures the complete market worth for products and services sold and bought by organizations and consumers within an economy in a years’ time. Nominal GDP is a form of real GDP but the difference is that nominal GDP creates room for inflation with in the economy. Interest rate is the percentage of added to an amount that has to be paid back but there are two kinds of interest rates which are nominal and real. Nominal interest rates are those that are inflated and cause your principle balance to be more than what it originally is. Real interest rate is the actual amount of what you would be repaying due to the inflation (Colander, 2010). Economic changes are measured in real GDP which reflects the market value of the products that are sold within the economy for the period of one year; this is a result of people producing and selling goods...
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...activities affect different aspects of our lives to do our best to prevent them and decrease their negative effects. Purchasing Groceries The purchasing of groceries can affect the government, households and businesses in several different ways. This purchase can affect businesses because stores that supply groceries must supply the demand of certain products. The demand of certain products raises the demand for the business and therefore allows it to grow. Purchasing groceries affects households because in order to sustain a normal household in today’s times, you must provide groceries for your family. The prices of the groceries and how many you purchase are determined by how well your family’s income is and also the demand for certain groceries. Purchasing groceries affects the government because it keeps the economy running smoothly with a normal amount of growth. The flow of the resources for groceries, like items such as fruits and vegetables, from one entity to another can be seen in the people who are consuming the groceries. It can also be seen in the way that purchasing groceries sustains the economy. One current event that relates to the purchase of groceries is the movement to get people to stop throwing away product on the date of expiration. “The dates solely indicate...
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...ECO 372 Paul Updike May 5, 2014 Part 1 • Gross domestic product (GDP) – The total market value of all the products and services a country provides or consumes over the course of one year. • Real GDP - The total market value of all the products and services a country provides or consumes over the course of one year based on prices of a given year. • Nominal GDP - The total market value of all the products and services a country provides or consumes calculated with existing prices. • Unemployment rate – This is the number of people in a country or economy who are able to work but have been laid off from their jobs. Many of these people are more than willing to work but sometimes have a hard time finding a job. • Inflation rate – The rate at which the prices of services and products continuously rise, inflation causes the prices for products to rise. It makes everything more expensive than a month ago or days ago even depending on how fast the inflation rate is moving over the course of time. • Interest rate – The fee paid when borrowing money from a financial institution for buying a car, house, etc. The financial institution charges this rate so that they make a profit on the money that you are borrowing from them. This rate can be higher or lower depending on your credit score. People with excellent or good credit will get a lower interest rate than people with bad credit scores. Part 2 The U.S. economy is divided in three sectors that are household, business, and...
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...According to David N Hyman, (1989), production is the process of using economic resources or inputs in order to produce output. The transformation of raw materials into finished goods or services has been a major factor in any economy as this is the major attributes that has help build today’s economy since the beginning of most economies worldwide. Production on its own is insignificant as there are several factors to consider when producing the end product. This is what is known as the factors of production. FACTORS OF PRODUCTION There are several factors of production to consider. They are; a) Capital b) Scarcity c) Technology d) Cost of production e) Opportunity cost f) Fixed cost and variable costs g) Production possibilities h) Resources i) Price The above factors each affect production in their own way. A deeper look into them will reveal each of these factors’ contribution to the production process. A. Capital Capital, according to Ronald M and Robert A, (2003), this is anything that is produced in order to increase productivity in the future. Along with human capital, there is physical capital, which includes buildings, machinery and other equipment. Capital can also be monetary which is required to boost production by enabling purchase or raw materials and the equipment required to process it. Capital in more ways than one is a major factor as it affects any other aspect of production. Without it production cannot take place as capital provides the means...
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...study of economics will determine connections between employment and spending as well as the growth of the economy. There are many factors that can affect the economy. These factors may include: the unemployment rate, inflation rate, interest rate and gross domestic product. , The gross domestic product is the total market value of goods and services produced in the economy over a year. The gross domestic product is one of the primary indicators used to measure the health of the economy. Economists rely on the comparison of the gross domestic product from year to year to determine if the economy has grown. The real gross domestic product is the total market value of goods and services, stated in prices over a year. The real gross domestic product provides more accurate numbers. The nominal gross domestic product is the gross domestic product where inflation has not been taken into account. Gross domestic product may appear higher than it really is if inflation is not accounted for. The unemployment rate is the number of people in the workforce divided by the number of people unemployed. The unemployment rate is used to make comparisons between the current and previous years unemployment rate. It measures how many people are employed which provides information about the economy. If the unemployment rate is high, that is an indication that the economy may be facing a recession and appropriate actions may be taken...
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... 2013 Beau Whitney Fundamentals of Macroeconomics Paper Macroeconomics affects households, the government, and businesses. The gross domestic product (GDP) measures the dollar value of products or a service at any given time period and shows how strong the economy is. The real GDP measures the dollar value as it changes in the market. Nominal GDP measures how strong the dollar value is (because of inflation, figures are sometimes inconsistent). The unemployment rate is measured by how many people are reported out of work in a country at any given time. The inflation rate measures how prices increase and decrease and shows the strength and power of the economy. Interest rate measures the amount of money that will be paid back to a loan company when taking out a loan. GDP is the measure of the output of a country, state, or city. When shopping for household goods or purchasing product for a business the GDP, real GDP, and nominal GDP play an important role as to what is actually purchased. The GDP is going to determine how much the product is going to cost the consumer. The real GDP (which determines the value of the dollar) will determine whether the consumer wants to purchase the product at the asking price. The nominal GDP measure the dollar value and determines whether the consumer can afford to purchase products. Because of inflation prices change and the dollar value is not consistent. When people are shopping, whether the consumer or business owner, they sometimes...
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...systems to keep track of the flow of money. The first is a closed system, which basically trades the domestic’s cash flow, plus the mechanism which is used by the nation. The second method is called open system; the open system is used mostly to trade all forms of cash flow also international purchases and sales. The closed system form is for any economy it focuses on keeping cash flow in one nation. The flow goes from corporation that hires to raw resources to produce goods and services. The goods and services, then sold back to nations with a steady cash flow maintain in the nation. However, the closed system is not perfect, but known for an ideal method of economics. In some cases, a closed system shows a number of leakages that occur from money traveling out of the economy, but not coming back into the right hands, businesses or individuals. For instance, the government taxes are spent for protection against crime and fires and not given back to the community, which then is lost in the system. Now not only leaks occur, business and Americans also buy products from nations that can make goods and services for a cheaper price. In 2010, 500 billion dollars was lost in the economy because having more imports than exports. This will occur when spending in other nations and not selling enough to pick up the slack. In an open system that lacks foreign transactions, an open system provides just that. In an open system are composed of closed system and includes profits...
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...Consumption is the largest GDP component in the economy, including of private expenditures in the economy, household final consumption expenditure. These personal expenditures fall under one of the following categories: durable goods, nondurable goods, and services. Such as, food, rent, jewelry, gasoline, and medical expenses, but not the purchase of new housing. People can also spend it on domestic goods or as savings, when they get their wages. Private consumption expenditure is to measure the consumer spending. It is to measure the money value spent by households for goods and services. Consumer has desires to make an effort to satisfy they needs. Investment includes the business investment of the equipment, but does not include the exchange...
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...the process of researching the fundamentals of macroeconomics and how all the different sectors work with, for, and even against each other at times, I decided to focus on the concept of circular flow. Like energy, value can only be changed or repurposed, but it never actually disappears. A circular flow model of the macroeconomy containing three sectors (business, household, and government) and three markets (product, factor, and financial) that illustrates the continuous movement of the payments for goods and services between producers and consumers, with particular emphasis on taxes and government purchases. There are other circular-flow models, including two and four sector circular flows, but the three-sector, three-market circular flow model illustrates the key roles that the government, household, and business sectors play in the macroeconomy. It expands the circular flow model by illustrating how taxes are diverted from consumption expenditures to the government sector and then used for government purchases. It illustrates that taxes do not vanish from the economy, but are merely diverted (AmosWeb, 2015). The Three Sectors The three macroeconomic sectors represented in this model are: * Household Sector, which includes all people, using economic decision-making to satisfy their varied wants and needs. This sector is responsible for consumption expenditures. In short, it is the consumer class as a whole. * Business Sector: This includes the institutions (especially...
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...longstanding problems which are growing in scope and magnitude. Quantitative analysis carried out by the OECD indicates that the volume of tangible counterfeit and pirated products in international trade could be up to USD 200 billion. With a figure like this, sales of counterfeit goods world-wide exceed the GDP of approximately 150 States on the planet. This figure does not, however, include counterfeit and pirated products that are produced and consumed domestically, nor does it include the significant volume of pirated digital products that are being distributed via the Internet. If these items were added, the total magnitude of counterfeiting and piracy worldwide could well be several hundred billion dollars more. In spite of all the efforts made up to now, counterfeiting and piracy are a plague that affects practically every economy on the planet and, what is more, they are expanding rapidly via various distribution channels that obviously include the Internet. In 2006, all the records were smashed with more than 250 million counterfeit articles intercepted at European borders, compared with 75 million the previous year. The number of seizures also exploded, increasing from 26,000 to 37,000 from one financial year to the next. Some see the rise in counterfeiting of goods as an inevitable product of globalization. As more and more companies, in an effort to increase profits, move manufacturing to the cheaper labor markets of the third world, areas with weaker labor...
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