Macroeconomics Case

Abstract

Economics is the study of how people satisfy their wants and needs with the limited resources they have. It mainly focuses on the production, distribution, trade and consumption of goods and services. Macroeconomics is concerned with the status of the economy as a whole which attempts to view things in aggregate for a society at large. It can be used for explain fluctuations in output and production for corporations to know what the economy's overall level of output and production is. It also helps individual firms make microeconomic decisions. Those ways can show the level of economic growth.

Relationship of the increase of income and gross domestic growth

"The world economy has been growing in recent decades, with per capita income increasing by about 1.5 percent per year. Increases in income translate into a higher standard of living for consumer's better cars, houses, and clothing and more options for food, entertainment, and travel."

In macroeconomic, determine a growing economy that usually base on the value of Gross Domestic Product (GDP). GDP is used to determine the productivity in economy to find out the aggregate population. It is focusing the total amount of all the finished goods and services produced during a specific period of time. It can show the relationship between the consumption and the economy growth. As more income per capita, assuming that there would be more spending that people can consume more of all goods and services as they have more income. Then the consumption increase and the GDP increase. However, due to the economy has more demand to produce these products that lead to increase the inflation, which is the way that increased prices in general to measure these prices which can be adjusted according to the desires of the individuals, government or institutions to make the evaluation.

"Between 1960 and 2001, the economic growth rate was 2.2 percent per year in the United States, compared to 2.3 percent in Mexico and 2.7 percent in France. But in some countries, the economy actually shrunk, and per capita income dropped. Among the countries with declining income were Sierra Leone and Haiti. In the fastest-growing countries, citizens save a large fraction of the money they earn."

In the situation that the firms can borrow the funds saved to purchase necessary things such as machinery and equipment that make their workers more productive. The fastest-growing countries also have well-educated workforces, allowing firms to quickly adopt new technologies that increase worker productivity. The well-educated workforce, which is assumed that they can have higher positivity as they have better organization with less error and less time to finish the task. As more productivity makes greater amount of higher quality of resources for more consumption. The more amounts of consumption then the GDP grows up.

Relationship of the government policies and business decision making

"The government uses various policies to influence interest rates (the price of borrowing money) and the inflation rate. For example, the United States uses the Federal Reserve System to either increase or decrease the supply of money, which in turn effects the overall economic environment as a whole."

The various policies are talking about the Fiscal Policy and the Monetary Policy. Fiscal Policy is about the government to achieve the economic objectives through government spending as well as taxation and it is the alternative to Monetary Policy, which is the practice of the government to manage the supply of money for achieving economic objectives. The various policies may affect a firm to make informed business decisions. For examples, macroeconomics can also apply to a manager to make decision to borrow money for

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