Principles of Macroeconomics
Principles of Macroeconomics
Macroeconomics is the discipline of measuring the interactions between businesses, communities, and governments on a large scale. Gross domestic product is an important measure of a countries output to the global economy. GDP is an essential measure of a country’s economic health and an very important principle of macroeconomics. The formula to calculate GDP is listed below:
Goods produced + Service rendered + Government Spending + (Exports) - (Imports) = GDP
Real Gross Domestic Product equals to the measure of the output of the Gross domestic Product that is acclimated for inflation or deflation. The Nominal Gross Domestic Product differs specially on the aspect that the change in price is not accounted. The unemployment rates is the quantity of people that are able to work due to their age, studies or other conditions but are currently unemployed. Inflation rate is the variation that can be positive or negative of goods or service. Most of the time when the inflation is negative it’s also call deflation but sometimes it’s common to see a negative inflation. Interest rate is the annual % divided by the quantity owed each month on borrowed capital.
On the second part of the paper some things that are explained in the first part will make a complete sense when they become related with real life examples. I will show the link between the following economic activities:
Purchasing of groceries
Massive layoff of employees
Decrease in taxes
The economy of a nation is a large number of factors linked each other and strictly related that easily become an ecosystem just as in the nature. All these items need to be monitored and adjusted to maintain a balance that allow all the parts of these system survive and if possible improve.
When consumers shop groceries at a supermarket or anywhere using their money they actually contribute to the system or on the other side finish a cycle. For somebody perform a productive task he must know that on the other side there’s a consumer with the will to purchase that item so booth need each other. But sometimes groceries are produced overseas and become cheaper from other countries than from the consumer’s country. This may be cause by a government decision to decrease the taxes to aid the free competition or regulate the industry to adjust their prices to the world standards and make the country competitive globally. On the other side the decision to lower taxes and open imports will decrease the need of employees to produce the products and this will produce a massive layoff of employees.
This high number of people without jobs and with less money to buy will impact directly on the sales of groceries and then the money that come from the taxes will be also lowered due to the recession.
All these changes in the