Fundamentals of Macroeconomics Activities Influences

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Table of Contents

Introduction
Decrease in Taxes
Massive Layoffs
Purchase of Groceries
Event
Conclusion
References

Introduction

Macroeconomic activities influences on different areas of the economy. The paper evaluates the way in which different activities taking place in the economy affects businesses, households and government dealings.

Decrease in Taxes

Decrease in taxes increases the disposable income for households. This is because decreased taxes make households to hold more money. The disposable income then drives the consumer demand (Herendeen, 2008). The increased consumer demand increases consumer spending, which makes businesses to increase sales. Decreased taxes reduce government revenue because the amounts received from taxes decreases (Herendeen, 2008). This makes the government to increase production (GDP) for the economy.

The increased production reduces unemployment levels as well as boosting the sluggish economy (Herendeen, 2008). A decrease in tax rate benefits businesses through the increase in net profits after tax. Due to the increased profits, businesses may direct the excess profits towards the growth of operations and production. The improvement in production creates positive impacts on the economy by allowing the government to access additional resources for making investments (Herendeen, 2008).

Massive Layoffs

Employees’ amount to spend reduces in the event that they lose jobs. Unemployed individuals end up reducing spending on luxury goods. In cases where they remain unemployed for long, they abandon some basic needs (Walden & Thoms, 2007). Large-scale reductions in consumer spending may adversely affect businesses. This happens when businesses become unable to make adequate sales. In addition, businesses that largely rely on luxury spending are negatively affected (Walden & Thoms, 2007).

Reduced functioning of businesses leads to more layoffs in the economy because businesses are unable to realize adequate wealth and profits to maintain a stable income for workers (Walden & Thoms, 2007). Massive layoffs affect the government through reduced flow and distribution of resources. This ultimately leads to economic depression. The depression makes it difficult for the government to deliver its services to both the households and businesses (Walden & Thoms, 2007).

Purchase of Groceries

A number of factors usually influence purchasing activities in the economic system. This is because most of the products found in the grocery store might have originated from other nations. For instance, some goods such as bananas and avocados come from Brazil and Mexico respectively. Countries have comparative advantage, which makes it possible for them to engage in international trade (Walden & Thoms, 2007). Such advantages make it possible for nations to import groceries from other regions.

When households purchase groceries, they create demand for the products. In addition, household needs for grocery is satisfied. Business sales increase when households purchase groceries. Thus, purchase of groceries improves the functioning of businesses (Walden & Thoms, 2007). The purchase of groceries also affects the government in a number of ways. The government will generate revenue from the imposition of tariffs.

The government then uses the obtained revenues in making developments in the country such as the construction of transport networks (Herendeen, 2008). The developments made by the government also affect the operation of businesses. Thus, businesses’ access products at lower costs and sell them at lower prices, thus benefiting the household. This is because the household will be able to access more goods at cheaper prices (Herendeen, 2008).

Event

The 2008-09 recessions affected the three activities in a number of ways. The recession led to decreased taxes due to the effect of reduced wages and lost jobs. In addition, the recession also led to massive layoffs and several employees became jobless in the process. The recession also led to reduced purchasing of groceries due to households’ reduced purchasing power.

Conclusion

In summary, the decrease in taxes may create several implications for households, businesses and the way a government operates. Massive layoffs negatively affect the economic operations in general. The choices households make in relation to purchase of grocery affect other large-scale factors.

References

Herendeen, J. B. (2008). Issues in economics: An introduction. Lanham [Md.: University Press of America, Inc.

Walden, M. L., & Thoms, P. (2007). Battleground: Business. Westport, Conn: Greenwood Press.

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