Macroeconomics: Inflation and Overall Price Level Essay

Submitted By lawbyevy58
Words: 555
Pages: 3

Macroeconomics is the sum total of economic activity, dealing with the issues of growth, inflation, and unemployment. It concerns the effects of national economic policies, an example of which is taxation rates and application, on the national economy. Macroeconomics is based on assumptions in microeconomics. Gross domestic product is an economic statistic describing the monetary value of all the finished goods and services produced within a country’s borders. Included are all of private and public consumption, government outlays, investments, and exports less imports within a defined territory. It includes income earned by residents from overseas investments, minus income earned within the domestic economy by overseas residents. Aggregate supply, also called total output, is the total supply of goods and services produced within an economy at a given overall price level. It describes the relationship between price levels and the quantity of output that companies are willing to provide. The higher the supply the lower the price. Higher prices encourage expansion of production. Aggregate demand, also known as total spending, is the total amount of goods and services demanded in an economy at a given overall price level. It describes the relationship between price levels and the quantity of output that producers are willing to provide. The higher the demand the higher the price. Wages paid for labor fuel consumer spending Unemployed workers represent wasted potential production. Official unemployment refers to the number of civilian workers who are actively looking for work and not currently receiving wages. Official unemployment statistics exclude those who would like to work but have discontinued employment searches because of inability to find work. The true unemployment rate is always higher than the official rate. Inflation is a consistent increase in the price of goods and services over time. Money loses its purchasing power. For example, it takes more dollars to purchase the same goods or services. Deflation constitutes the decrease in the price of goods and services over time. It results in increased purchasing power, taking less dollars to purchase the same goods or services. Monetary policy is represented by the actions of a central regulatory…