Macroeconomics Analysis Assignment
Added on 2021-05-30
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Running Head: MacroeconomicsMacroeconomics AnalysisStudent NameInstitutional AffiliationCourse/NumberInstructor NameDue Date
Macroeconomics2Macroeconomics AnalysisJournal – U3Part aEffective demand and supply determines the success of every business. There is more potential for maximizing profit when a business owner or manager knows his/her effective demand. The first thing I would do is to determine what the consumers are willing to buy other than what they want. What they want only gives some notional demand. Effective demand can only be created by predicting the actual demand that consumers will actually place. It is difficult to estimate an effective demand, but if I estimate a value closer to what my customers will actually buy at the price am currently offering, I will only supply enough for the same. By supplying just enough I will be reducing costs and overheads as much as possible and thus I will maximize my profits.Part bRaising the firms’ payable payroll tax to enable the government to lower the workers’ payable payroll tax has the following consequences. Tax is a major cost component for producing firms. Firms set prices depending on the cost incurred during production, thus, if the tax cost component is increased, we expect the price for the produced goods or services to rise aswell; this is one of the cons. One of the pros is that the workers will be relieved some of their tax burden and will have a higher level of disposable income. A higher disposable income for the workers means that there will be an increased aggregate demand, and due to the inability of firmsto produce sufficient supply given the cost constraint, there will be a shortage which in turn will lead to higher prices. In this case there will be no benefit for the workers since all the extra income will be consumed by purchasing the same level of goods and services. This government’s policy is inflationary and should not be implemented.Journal – U4Part aThe economic agents are the major parties that businesses and households depend on to determine the economic level on the national economy. When these agents lose their confidence, it means that the economy is not doing well and a need for an action. This causes the consumers to spend less as they are uncertain of the direction the economy is taking. They save more for theunknown probable circumstances. The opposite is true, a rise in the confidence of economic
Macroeconomics3agents stimulates the spending level as consumers don’t mind their spending when the economy is on a good outlook. The factors responsible for increase in consumer spending and investment would be; lower interest rates, high economic growth, high level of loans availability, lower inflation, expansionary government policy such as lower taxes, high expected return, higher levelof savings, etc. The confidence of consumers and investor does not affect my spending pattern because it doesn’t have a direct impact on the price level.Part bGDP is the best way to determine the performance of an economy. Ignoring the transfer payments in its computation does not make it less informative as they do not absorb any resources. Transfer payments do not also lead to production of output and thus do not fit in the computation of GDP which is the monetary value of every good and service produced for a givenperiod of usually one year within the borders of a country. The value of used goods cannot also be included in this measure as the depreciation value of this asset has already been taken into account. Since its original value was considered in the computation of GDP for the year it was produced, its inclusion again would bring the problem of double accounting. The other factor excluded in the estimation of GDP is the Net Foreign Factor Income which is the difference between income earned from abroad by firms and citizens and the income paid to foreigners. This exclusion has a significant impact on economic welfare because the country may be performing well but a greater proportion of income is absorbed by the foreigners. Journal – U5Part aMacroeconomic indicators are very useful in business. There are certain indicators that are useful to every business. In planning for the business, the predictions on these indicators is very essential. For instance, if the inflation rate is projected to rise, it means consumers’ income will be high and thus demand will increase; price for raw materials will also rise. Thus, I will secure enough stock to supply during this period; I’ll also order more raw materials to avoid the increased prices which will interpret to higher costs of production. Interest rate helps in determining the cost of capital for the business. Higher interest rate means that the cost of servicing debt is very high and thus a need to source capital by other means other than loan from monetary institutions. The indicators are relevant for decision making for the business because
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