Fundamentals of Macroeconomics

Stacy M. Thompson

Eco/372

February 2, 2013
Mr. Jack Karczewski

Economic Activities

How the following terms and activities have economic impact on the macro economy

There are many different concepts and factors that explain the macro economy. Many factors play into what can positively or negatively affect the economic growth of the country. The following terms will be defined and explain the impact on the economy. Gross domestic product (GDP) is the total market value of all final goods and services produced in an economy in a one-year period. It determines whether the economy is growing either more quickly or slowly than the prior quarter or same quarter of the year before. Real GDP is the total amount of goods and services produced, adjusted for inflation. Nominal GDP is the total amount of goods and services produced calculated at existing prices. Unemployment rate is the percentage of people in the economy who are willing and able to work but are not working. Inflation rate is the percentage increase in the price of goods and services used yearly. Inflation causes depreciation of the dollar, higher wage demand, Interest rate is the percentage of the total amount of money that is borrowed. It affects the economy by influencing stock and bond interest rates, consumer and business spending, inflation, and recessions. Purchasing groceries, massive layoff of employees and decrease in taxes are effects on the economy based on the defined terms. How? Start with inflation plays because it coincides with all the other terms. If inflation is high, businesses raise their prices, the spending habits of consumers change, demand for wage increase occurs, and investments are low which results in massive layoffs and high unemployment and decrease in taxes. When consumers buy groceries, they tend to bargain shop, meaning they compare prices of different stores and name against store brands. Many consumers sometimes buy from wholesale stores to buy items in bulk so they get more and buy less. The more groceries bought, more taxes being paid to the government and that means better roads, schools, hospitals and other areas of government funding will grow. Unemployment results in less spending, more debt, less taxes being paid, and more money spent by the government for assistance which leads to cut backs in other areas. The household where there would be one or two incomes is now either one or no income. When consumers are out of work and looking for jobs now limit their spending in order to maintain their households and this will cause a drop in sales for retail and other businesses. Some acquire more debt because they have loans for homes, cars, credit cards, ect. Lenders suffer because the consumer is unable to pay back the loan borrowed at a certain time and the government has to