Edgar Abnoose
3/8/11
Macro Economics
Essay #1
If the price of food continues to rise as the predicted 5% increase (for 2011), there will only be more people that will need food stamps, on top of the 47 million people already using them. This ignifies a lack of income in the community, which in turn represents a lack of jobs. This reaction of events is clearly shown in the circular flow model of just how dangerous it can be: due to the higher prices of food. Having higher price foods when people already are having so much trouble in this recession will cause households to not buy as much , in turn the stores will have a surplus and make less profit, causing them to produce less and require less workers. Layoffs will then continue to damage the economy causing the unemployment rate to further plummet past the 11% it is already at, which would be terrible (tying back to the households after influencing the output market, businesses, and input market). Other non related factors that may cause a shift in the Gross Domestic Product can also be seen in some other things such as an increase in tax, inflation, depreciation, or the government providing less welfare, Medicaid, and healthcare.
From an economists point of view there are many obvious indicators that the United States economy will suffer on a macro level from this. As it says in the topic you gave us, this is a rising price trend among many other markets as well, which is due to a myriad of problems such as weather or the price of oil. This can be proven because when the weather is bad, transportation becomes more of a problem making items harder to obtain, as well as gas prices rising causing people to ask for higher prices for their products to cover their higher transportation costs. It goes far beyond food when people cannot afford the standards of living. Since the price of food is changing this would be considered a movement and not a shift on the supple/demand chart. This movement throws the...