Fundamentals Essay

1178 WordsDec 16, 20145 Pages
Fundamentals of Macroeconomics ECO/372 November 10, 2014 Kathleen Byrne Fundamentals of Macroeconomics Macroeconomics is a term that is widely known but can be very intimidating when trying to become versed in this subject. There are several terms and concepts that need to be learned in order to begin to grasp the complexity of this topic. Massive layoffs of employees, decreases in taxes and the purchasing of groceries have many effects on the economy. In fact these economic activities contribute to the fluctuations in the economy. These economic activities cause fluctuations in the economy which affect government, households, and businesses. Macroeconomics and GDP In order to understand what macroeconomics is it is important to first define this term. According to Colander (2013), macroeconomics is the study of the economy as a whole (pg 5). Gross Domestic Product is a term widely used when discussing macroeconomics and it happens to be a tool that shows how the economy is doing. Gross Domestic Product is defined as the total market value of all goods and services produced in an economy in a year (Colander, 2013). This tool is used to determine how well the economy is doing because it shows whether the value of goods and services has gone up or down. The GDP is a downward slope that shows when prices are high the production of goods goes down because a person’s money does not go as far so they demand less. When prices go down production of goods goes up, because a person’s money goes farther thus allowing them to buy more. Massive Layoff of Employees Massive layoffs of employees, such as the layoff by GM in 2007, have a detrimental effect on the government, businesses, and households. Households are hit very hard by a massive layoff. The household loses that income that they were depending on to provide food and shelter. They may have unemployment but

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