Running Head: MACROECONOMIC IMPACT ON BUSINESS OPERATIONS
Macroeconomic Impact on Business Operations
Kevin Edwards
University of Phoenix
Introduction
Macroeconomics is economic factors that influence the state of the whole economy, such as changes in employment levels, gross domestic product (GDP), and prices in association to deflation or inflation (thebusinessdictionary.com). As the economy goes through its business cycles, important measures are taken to keep these factors stabilized and at a level of spending in the economy. These factors are analyzed with many economic indicators that tell us how the economy is operating overall. Consumers as well as companies use these factors in order to make financial decisions and governments rely on macroeconomics in deciding whether or not to increase or decrease interest rates, taxes, and making policy decisions. This paper will discuss monetary policy and its effect on macroeconomic factors such as gross domestic product (GDP), inflation, interest rates, and unemployment. This paper will also explain how money is created and how monetary policy can influence create balance between economic growth, low inflation, and a reasonable rate of unemployment.
Monetary Policy
Monetary policy is the regulation of the money supply and interest rates by a central bank, such as the Federal Reserve Board in the United States, in order to control inflation and stabilize currency. Monetary policy is one of two ways the government can impact the economy. By impacting the effective cost of money, the Federal Reserve (Fed) can affect the amount of money that is spent by consumers and businesses (investorwords.com). The Federal Reserve System was established in 1913 to maintain a sound and stable banking system throughout the United States and to promote a strong economy. Almost all banks are part of the Federal Reserve System, which requires that those banks maintain a certain percentage of their assets...