Macroeconomics

Fundamentals of Macroeconomics

Alkina Stone

ECO/372

June 25, 2014

Michael Peterson

Fundamentals of Macroeconomics

Whether one is experiencing a decrease in their taxes, is part of a massive layoff of employees, or is simply purchasing groceries, there is a resource flow from one entity to another and back again. Those entities cover government, businesses, and households. Most of persons’ daily activities affect government, households, and businesses. For example when you are buying groceries you are affecting government by paying taxes on all the items you are purchasing. You are also affecting the household of the famers that sold those groceries to the market. You are also affecting the market by choosing to buy your groceries there. You are fueling the economy by spending money in places such as markets, malls, or any stores. You are even affecting the economy of your own home by taking money away to buy food, clothes, or household supplies.

When a company had to make the decision to do a massive layoff of employees the government is affected because now the unemployment rate has gotten higher. Those employees household suffer financially because now they will not be getting the same amount of revenue to pay for bills or their families’ needs. This also affects the company laying people off. The company suffers in productivity. Since there will not be as many employees the employees that do stay now have to do double the work to make up for the employees that were lost. This might also cause the quality of the products or services to do down causing the company to lose money or to go out of business.

When taxes decrease, government receives less revenue. Usually when government taxes have been lowered, it is because the economic state of the country is good. Households benefit from a decrease in taxes because now they have more money to pay bills and support their families. Businesses also benefit from this because now they do not have to pay as...