Fundamentals of Macroeconomics
ECO/372
June 30, 2014
Fundamentals of Macroeconomics
Macroeconomics the performance of the overall economy is taken into consideration and evaluated (Macroeconomics, 2014). Everyday events and tasks that are carried out by businesses, governments, and households, all rely on the fundamentals of macroeconomics and contribute to the health of the economy. Gaining knowledge on the means by which the economy rises and falls provides great insights to the ever changing standings of the economy.
One of the most important tasks that affect both the government and every home is the purchase of groceries. The state of the economy is a big determining factor of the purchasing power a family has over the amount of groceries they are able to obtain. When inflation is present, prices will be higher, thereby limiting the amount of groceries a consumer would normally purchase. This can be detrimental as it can affect the ability to feed everyone in the home adequately. At this point, a household may have turn to government aid to supplement their inability to get by. Inflation also affects businesses because, at a time where prices are high due to inflation, consumers will tend to shop around for sales. This means grocery stores may have to lower their prices in order to remain competitive against other grocery stores, and maintain their customer base. Therefore the ability for a household to purchase groceries not only affects a family, but the grocery businesses, and the government (Colander, 2013).
Another critical event that adversely affects the economy are massive layoffs. When businesses conduct a massive layoff of their employees, the government takes a hit, as it influences both the GDP (gross domestic product) and the consumer price index. Economists utilize these two measurements to gauge the impact on the price of goods and services. Households are affected by massive layoffs, because of the reduced income, which...