Principles of Macroeconomics/ ECO/372
Fundamentals of Macroeconomics
“Macroeconomics is the study of the economy as a whole. It considers the problems of inflation, unemployment, business cycles, and growth” (Colander, 2013, p.5).
Economic activities go on day in and day out. Throughout the United States, we have consumers buy, sell and trade. We have many economic activities from an employee requesting a loan on their profit sharing plan to a self employed business owner withdrawing a large sum of money from their account to pay quarterly taxes, to a person settling their late husband’s estate. The same goes for the average consumer will purchase groceries for their family that is on a budget.
Purchasing of Groceries
As a consumer I am the household member that purchases our family’s groceries on a weekly basis. I have to follow a budget that my husband and I have planned out based on what money we have coming into our household. This would also include the payroll taxes that we pay before we receive our net income. The government will set taxes for certain items based on the type of items and the state I live in. If taxes are higher on the products that I need to purchase then this will force me to purchase less groceries. Therefore, the store will sell fewer products in which they will order less from the manufacturing company. If the manufacturing company does not sell enough products, they will need to produce fewer products and eventually need to lay-off employees. Massive Layoff of Employees
Manufactures are forced to implement a massive layoff when their product is not selling to its full capacity or at a profitable net income. Manufactures that do not produce at their full capacity will need to pay more for their raw materials. In turn they will need to sell their finished product at an even higher price to meet their profit margins. With the law of supply and demand, if the price increases then the quantity in demand will decrease. Not only does the manufacture have to deal with their human capital crisis they also have U.S. Government regulations to up hold, fees and taxes to be paid. If the manufacturing company cannot find an even middle ground to continue to operate, they may lay-off employees, be granted a government bailout or file for bankruptcy as in the following example. “GM’s layoffs excluded the cuts announced by former GM-owned auto parts maker Delphi, which filed for bankruptcy protection last October. In 1999, Delphi laid off 18,000 workers. Now it is reportedly seeking to cut two thirds of its 34,000 hourly workers and slash hourly wages from as much as $30 per hour to as little as $10” (Morley, 2006, para. 10). This has lead to globalization and outsourcing of products that can be produce at a less expensive price. “Admirers of globalization contend that freer access to foreign markets and cheap labor increase corporate profits and thereby benefit the U.S. economy. While this argument may superficially sound compelling, it ignores the dangerous long-term effects of manufacturing losses. In