Fundamentals of MacroeconomicsEssay Preview: Fundamentals of MacroeconomicsReport this essayPart oneMicroeconomics and macroeconomics are very much interrelated. Microeconomics is the study of individual choice and how that choice is influenced by economic forces. Microeconomics studies such things as the pricing policies of firms, households decisions
on what to buy, and how markets allocate resources among alternative ends. Macroeconomics is the study of the economy as a whole. It considers the problems of inflation, unemployment, business cycles, and growth. Macroeconomics focuses on aggregate relationships such as how household consumption is related to income and how government policies can affect growth (Colander, 2010). This paper will attempt to describe certain terms to give one a better understanding of macroeconomics. Additionally, we will take a closer look at purchasing groceries, massive layoffs of employees, and decrease in taxes to see how each of these activities affect government, households, and businesses.
When trying to define macroeconomics, knowing the meaning of certain terms can be helpful. There are many factors that affect the economy such as gross domestic product (GDP), real GDP, nominal GDP, unemployment rate, inflation rate, and interest rate. GDP is the total value of goods and services produced in a countrys economy, typically over one year. Economists measure growth with changes in real GDP which is GDP that has been adjusted for inflation. To separate increases in GDP caused by inflation from increases in GDP that represent real increases in production and income, economists distinguish between nominal GDP, which is the sum of GDP at existing prices, and real GDP (Colander, 2010).
Inflation-free macroeconomics (CFF) focuses on the cost of producing U.S.-made goods and services. The key to CFF is that if the price of a given supply or service in such a location (e.g., in a shop) is zero after its price falls, the supply (i.e., the service) will be reduced at the price of the resource used to produce it. A cost of producing U.S.-made goods and services includes, among several other things, the cost of transportation (e.g., taking care to maintain a supply of gasoline for a long time, or providing transportation through the United States), the costs of maintenance of the fuel supply and transport, fuel prices (e.g., the operating cost of running an oil refinery and distillers, gasoline and diesel fuel, etc.), and, most importantly, labor costs. This latter cost is determined by a “tractal effect” between fixed-price (exports) and nominal goods, which is the difference between the costs of the two-year fixed-price period and the fixed-price period or periods that are normally measured in dollars. A tractal effect is a time when the price of goods and services is much less than anticipated because there is less demand for those goods or services as prices fall or rise. The fact that more Americans consume less, as opposed to more, is due to lower costs of production. In general, higher incomes are an increase during the inflation-free time frame that is called the inflation rate.
For that to happen, the central government must change its mind. In order to understand CFF, one needs to understand the effect of economic growth on the nation as a whole. As shown in Figure 1 (or the accompanying Figure 2), the price of U.S. manufactured goods or services increased by only 0.36 US cents in October 1999 (P, b) versus 0.17 US cents in 2006 (P, c).
Figure 1 Percent change in price of goods and services since October 1999 vs. November 2004. Credit: ©2010 John Wiley & Sons, Inc.
While the United States has produced much more of the world’s population than the European Union, its economic growth has not led to a significant increase in the population (P, d). There are other factors influencing the United States’ economic growth. As discussed above, the cost of U.S.-made goods and services, whether imported or American produced, has declined. For more details about these factors, refer to the Table S3.3–1. For the purpose of calculating CFF the cost of producing U.S.-made supplies and services for each state and for calculating the national inflation-free rate
Inflation-free macroeconomics (CFF) focuses on the cost of producing U.S.-made goods and services. The key to CFF is that if the price of a given supply or service in such a location (e.g., in a shop) is zero after its price falls, the supply (i.e., the service) will be reduced at the price of the resource used to produce it. A cost of producing U.S.-made goods and services includes, among several other things, the cost of transportation (e.g., taking care to maintain a supply of gasoline for a long time, or providing transportation through the United States), the costs of maintenance of the fuel supply and transport, fuel prices (e.g., the operating cost of running an oil refinery and distillers, gasoline and diesel fuel, etc.), and, most importantly, labor costs. This latter cost is determined by a “tractal effect” between fixed-price (exports) and nominal goods, which is the difference between the costs of the two-year fixed-price period and the fixed-price period or periods that are normally measured in dollars. A tractal effect is a time when the price of goods and services is much less than anticipated because there is less demand for those goods or services as prices fall or rise. The fact that more Americans consume less, as opposed to more, is due to lower costs of production. In general, higher incomes are an increase during the inflation-free time frame that is called the inflation rate.
For that to happen, the central government must change its mind. In order to understand CFF, one needs to understand the effect of economic growth on the nation as a whole. As shown in Figure 1 (or the accompanying Figure 2), the price of U.S. manufactured goods or services increased by only 0.36 US cents in October 1999 (P, b) versus 0.17 US cents in 2006 (P, c).
Figure 1 Percent change in price of goods and services since October 1999 vs. November 2004. Credit: ©2010 John Wiley & Sons, Inc.
While the United States has produced much more of the world’s population than the European Union, its economic growth has not led to a significant increase in the population (P, d). There are other factors influencing the United States’ economic growth. As discussed above, the cost of U.S.-made goods and services, whether imported or American produced, has declined. For more details about these factors, refer to the Table S3.3–1. For the purpose of calculating CFF the cost of producing U.S.-made supplies and services for each state and for calculating the national inflation-free rate
Inflation-free macroeconomics (CFF) focuses on the cost of producing U.S.-made goods and services. The key to CFF is that if the price of a given supply or service in such a location (e.g., in a shop) is zero after its price falls, the supply (i.e., the service) will be reduced at the price of the resource used to produce it. A cost of producing U.S.-made goods and services includes, among several other things, the cost of transportation (e.g., taking care to maintain a supply of gasoline for a long time, or providing transportation through the United States), the costs of maintenance of the fuel supply and transport, fuel prices (e.g., the operating cost of running an oil refinery and distillers, gasoline and diesel fuel, etc.), and, most importantly, labor costs. This latter cost is determined by a “tractal effect” between fixed-price (exports) and nominal goods, which is the difference between the costs of the two-year fixed-price period and the fixed-price period or periods that are normally measured in dollars. A tractal effect is a time when the price of goods and services is much less than anticipated because there is less demand for those goods or services as prices fall or rise. The fact that more Americans consume less, as opposed to more, is due to lower costs of production. In general, higher incomes are an increase during the inflation-free time frame that is called the inflation rate.
For that to happen, the central government must change its mind. In order to understand CFF, one needs to understand the effect of economic growth on the nation as a whole. As shown in Figure 1 (or the accompanying Figure 2), the price of U.S. manufactured goods or services increased by only 0.36 US cents in October 1999 (P, b) versus 0.17 US cents in 2006 (P, c).
Figure 1 Percent change in price of goods and services since October 1999 vs. November 2004. Credit: ©2010 John Wiley & Sons, Inc.
While the United States has produced much more of the world’s population than the European Union, its economic growth has not led to a significant increase in the population (P, d). There are other factors influencing the United States’ economic growth. As discussed above, the cost of U.S.-made goods and services, whether imported or American produced, has declined. For more details about these factors, refer to the Table S3.3–1. For the purpose of calculating CFF the cost of producing U.S.-made supplies and services for each state and for calculating the national inflation-free rate
Unemployment, inflation and interest rates are also important factors that concern economists. Unemployment happens when people are looking for a job and cannot find one. Similarly, the unemployment rate is the number of people in the economy who are able to work and want to work, but are without jobs. The U.S. unemployment rate is determined by dividing the number of people who are unemployed by the number of people who are employed, and multiplying by 100 (Colander, 2010). Inflation is when the price level of a good or service continues to rise. It is important to note that a one-time rise in the price level is not inflation. For example, if the price of something goes up 8 percent in a month but remains constant, then the economy is not in danger of an inflation issue because inflation is an ongoing rise in price. Interest rates are the prices that are charged or paid for the use of a financial asset, such as mortgage interest rates, interest rates on credit cards, and interest rates on government bills, interest rates on corporate bonds (Colander, 2010).
Part twoChoices made by government, households, and businesses can make an impact on the economy. Consider a family buying groceries as an example. The family purchases groceries with money, making the flow of resources from the family to the grocer. This exchange gives the grocer money to purchase more goods from the distributors to sell more items in their store. The monetary exchange also gives the distributors funds to pay its employees and other bills, such as power and water, as well as manufacturers for the actual products. The chain continues as manufacturers need to get resources from farmers. Additionally, the government receives taxes when consumers buy goods. So, the more goods a consumer purchases, the more taxes go to the government. Something as