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Fundamentals of Macroeconomics

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Fundamentals of Macroeconomics

Introduction

There are numerous economic activities in the society that affect government, household, and business in various ways. Some of the notable activities are purchasing of groceries, massive layoff of workers, and decrease in taxes. When these activities are performed, they are accompanied by the flow of resources among entities, which means the economic entities such as government, households, and businesses are affected (Boyes & Melvin, 2012). However, these activities may not affect the entities’ activities directly, but they are influential in ways that are not necessarily noticeable. Understanding these activities is important so that people can evade the likely negative outcomes associated with them and maximize the potential benefits that arise. Usually, macroeconomics is the field that is concerned with the study of the performance and behavior of the economy as well as interaction and exchange of resources among entities. This paper will explore the impacts of these aspects on the individual households, government, businesses, and the economy as a whole.

Purchasing Groceries

Purchasing groceries may be considered to be a simple task with minimal influence on the economy. However, the truth is that this activity is crucial and can affect the government, household, and businesses in one way or another. To start with the effect on businesses, the groceries are supplied by businesses which ensure that the prevailing market demand for groceries is met. When the demands of commodities increase, the businesses benefit because they are presented with the opportunities to grow. Secondly, groceries are significant for substance of households. The prices of the groceries and the quantities in which they are purchased are determined by the income levels of the households and the demand for the groceries (Boyes & Melvin, 2012). Thirdly, when the groceries are purchased, the government is able to maintain a smoothly running economy with a normal growth rate.

Theactivity of purchasing groceries is associated with the flow of resources among economic entities. For example, this is seen in the consumption of items such as fruits and vegetables by people. This is also evident that purchasing groceries helps to sustain the economy of the country. One current event that relates the purchase of groceries is people throwing away products at expiry, which should be discouraged. Buying excessive groceries one is subjected to damage.

Massive Layoff of Workers

Massive layoff of workers results to devastating outcomes, which significantly negatively affects the economy and the economic entities. When workers are laid off, they are unable to earn incomes, and buying the basic goods and services becomes hard for them. This affects the government, the households, and the businesses. To start with, when workers are laid off, households are the first to be affected, as they have to reduce their consumption levels and adapt to lower living standards. Secondly, the direct impact on businesses can be explained by the decline of income of the households. Businesses are responsible for provision of goods and services to the households, and when its members are laid off and lack enough income, then businesses experience reduced sales and profits and may eventually decline (Mankiw, 2014). Finally, the government relies on income tax from its citizens so that it can sustain the basic services to the public and provide social amenities such as hospitals, stadiums, and schools among others (Stockman, 1999). Massive layoff of workers means that the government will collect less income tax, and it will not be able to sustain its functions because of insufficient funds.  In fact, it will be forced to rely on foreign debts for funding.

When people are employed, there is a flow of resources among economic entities. Resources flow from the employers to the employees. The resources then pass to the businesses through payments for goods and services and to the government through remittance of income tax. One current event that relates to massive layooff of workers is the long felt effects of the great recession. Layoff of workers contributes to a decline in the growth rate of the economy and consequently affects many facets of the economy.

Decrease in Taxes

The change in the levels of taxes affects the disposable income of citizens. When the tax is decreased, the effect is that the households will have more disposable income in their hands and thus more money to spend (Stockman, 1999). They will have a bigger demand for goods and services. This means that businesses will be affected positively because they will have an opportunity of providing more goods and services to meet the new demand. The businesses will record increased sales and huge profits. The government is also affected in the way it will receive increased income tax from the businesses and the households. From the businesses, it will earn more tax because the businesses will make more sales that contribute to more Value Added Tax, which is then remitted to the government. From the households, more disposable income means people will buy more of the public services and this brings more revenue for the government.

When the taxes are decreased, there is a flow of resources from one entity to another. In this case, the resources are flowing from the households to the businesses and the government. This is performed through spending on products and services offered by these entities. One current event related to the decrease in taxes is an inflation of the economy. Lowered taxes increases the amount of money circulating in the economy and consequently inflation.

Conclusion

This paper has explored the effects of activities such as purchase of groceries, massive layoffs, and decreased in taxes on the economy, particularly on government, households, and businesses. These entities are integrated and interdependent on each other. This means that when one of the them is affected by the activities, the flow of resources among the entities is consequently affected.

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