Fundamentals of Macroeconomics
March 23, 2015
Fundamentals of Macroeconomics
Fundamentals of Macroeconomics economic principles apply and affect the entire economic system that encompass the world. Macroeconomics directly impact every part of our government and every individual’s quality of life. The health of the nation’s economy affects our economy. A few areas that determine economic health are the gross domestic product (GDP), gross national product (GNP) the unemployment rate, the inflation rate, and taxes. The Principle areas of Macroeconomics covered in this paper examines the flow of resources between three entities - government, ...view middle of the document...
The effects of this reduction increase the price of goods that shifts the aggregated demand (AD) left and the aggregated supply (AS) to the right. More layoffs will ensue from loss revenue in the industry, and household purchases will be fewer and more expensive.
Layoffs and reductions in purchase cause a reduction in taxes paid out to the government. These reductions hinder government agencies from applying adequate funding to programs that can relieve or reverse the spiraling trend in the market. When a nation go through a depression in the economy, like the great depression in 30’s, people become afraid to spend, and businesses become leery about hiring workers. No business would risk expanding or hiring workers on an assumption that sales will pick up at a given time. This theory holds true for the automobile industry after the bailouts of 2008 – 2010 as well. Layoffs affect the GDP (monetary value of finished goods and services) and the GNP (market value of all products and services provided by citizens of a country) negatively because the economy is decreasing.
The white bread industry has experienced a 56% decrease in consumption by Americans according to one survey. Before 2006, the survey further stated, white bread sales were leading wheat sales; however, the recent trend switch to purchasing bread free of gluten hurt the bread sales industry of all varieties. This trend reaches overseas into France where baguette-lover consumption is down 10%. American restaurants have adapted to this trend by removing free dinner rolls from serving tables due to reductions in white bread consumption. The reduction in sales of this daily consumed staple potentially affects AS and AD globally. This course of activity also aids in the decrease of the GDP, unemployment rates, and taxes.
Massive layoffs of employees increase the unemployment rate of a country. Massive layoffs affect the consumer’s standard of living which defines GDP. Massive layoffs cause salaries to go down therefore so does their spending. Massive layoffs experienced a vicious cycle globally in 2012. Two hundred million people were without employment which slowed down job growth and increased unemployment rate. Massive layoffs affect the economy dramatically because it impacts consumer spending which affect the business cycles of growth. Layoffs create a domino and a vicious circle - purchasing decreases, then production falls, and further layoffs follow. When this occurs, it affects households, businesses, and the government.
Hewlett Packard (HP), who employed more than 300,000 employees, after laying off 55,000 workers, plans to split their company into two Fortune 50 sized companies. After the splits, further cuts in their workforce will ensue. In spite of this negative course of action, HP’s investment in networking, advanced technological system, and cloud storage, leaves some HP employees optimistic about their future.
First Lady Michelle Obama...