ECO 372 Fundamentals of Macroeconomics Paper

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ECO 372 Fundamentals of Macroeconomics Paper

**ESSAY EXCERPT***

The economic activities for purchasing groceries affect the government because they determine the taxes on groceries; which items can be sold, the amount of taxes for each item, and when they can be sold. Households are affected because if taxes are high on groceries and the household income is low, it will prevent consumers from providing adequately for their families. This can force families to obtain assistance from social services, pantries, churches and other family members and friends. The effect on businesses would be damaging if consumers do not purchase groceries because they cannot afford to. If prices are too high in a particular store, consumers will go elsewhere to shop where it is cheaper. This can cause companies to shut down their business or force a merger.

Massive layoff of employees

The economic activities for massive layoff of employees affect the government because they will be responsible for paying for employees' unemployment, and Medicaid and food Stamps through Department of Social Services. Households will have the same effect with layoffs as the government, except households will have to rely on unemployment, Medicaid and food stamps. Massive layoffs to households can affect their living and spending expenses. It can prevent them from paying their bills, lose their homes, cars, and keep them from having the ability to keep up with the current living they are used to. In other words, put a damper in their budget. It also forces them to look for other employment; sometimes accepting positions that they may be over qualified for. Some are even forced to live

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Prepare a two-part, 700- to 1,500-word paper in which you: (1) define a set of economic terms and (2) analyze the circular flow model.

Use the phrases shown below in blue as first-level headings for your paper. Your paper should include the following:

Part 1

~ Definitions of Economic Indicators. Define the following economic terms/indicators. Only use definitions found in our course text or definitions found on the web sites of agencies, such as the Bureau of Labor Statistics and the Bureau of Economic Analysis, which compile the indicators. Do not use definitions found on online dictionaries or online encyclopedias.

Gross domestic product (GDP).

Real GDP.

Nominal GDP.

Unemployment rate.

Inflation rate.

Interest rate.

Part 2

~ Circular Flow Model. Describe how each of the following activities affects government entities, households, and businesses. Describe the flow of resources from one entity to another for each activity.

Purchasing of groceries.

Massive layoff of employees.

Decrease in taxes.

~ Include a conclusion that discusses why business managers should have a solid understanding of economic indicators and the circular flow model. Also, see the note,Introductions and Conclusions, which is posted in the Main forum for more information on conclusions.

Fundamentals of Macroeconomics Paper

Part 1 - Describe the following terms in your own word:

Gross domestic product (GDP) - The growth that economists measure changes in the market value of final goods and services produced in an economy within a specific year.

Real GDP - Real GDP represents the adjusted market price added to the current price which is inflation.

Nominal GDP - Nominal GDP represents the current or actual market price or income before inflation.

Unemployment rate - The rate that describes the amount of people out of work or unemployed due to no choice of their own. If the rate is low, then there are more jobs available for people to work. If the rate is high, then there are fewer jobs available.

Inflation rate - The number in price changes over time. This number can fluctuate between high and low. It can affect the consumer prices, cost of living and even gas prices.

Interest rate - The percentage of money that is added to a loan from banks and companies for consumers to pay back for purchases of mortgages, loans, financial aid, cars, boats, credit cards and other purchases. In most cases, the interest amount percentage is according to your credit. If you have great credit, then your interest rate will be low. If your credit is poor, then your interest rate is either high or you may not qualify for the loan.

Part 2 - The following activities affect government, households, and businesses:

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