Valerie J. Rountree APUS COLLEGE Author Note Valerie J. Rountree, Masters of Business Administration, Department of Information Technology Management, West Virginia College This research was performed by Valerie J. Rountree to support BUSN602 B001 SUM 11 – Assignment #5 – Managerial Analysis – Please assess the concepts and measurements of GDP, the business cycle, unemployment, inflation, and interest rates. Provide at least three specific examples. APA formatting required Correspondence concerning this article should be addressed to Attn: Valerie J.
Rountree, American Public University System | 111 W. Congress Street, Charles Town, WV 25414 | Toll Free: 1-877-755-2787. E-mail: valerie. [email protected] apus. edu Abstract The intent of this document aims to show that macroeconomics is the study of the interrelationships of aggregate economic variables. The most important of these, without question, is a country’s gross domestic product (GDP). GDP measures the total value of all goods and services produced by a country during a year.
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As such, it is a measure of the extent of economic activity in a country or the economic size of a country; and the consumption of goods and services is one way to measure an individual’s economic well-being. National income accounting uses statistical measures of income, spending and output to help people understand what is happening to a country’s economy. The economic decisions of millions of individual determine the fate of the nation’s economy. It will also help you understand the importance of the nation’s economy and it will help strengthen us to make better economic decisions.
Gross Domestic Product is used to measure business cycles. Gross Domestic Product is a monetary measure of all services and goods sold within a country annually. It measures the quantity of things a society produces. Fluctuation in growth of Gross Domestic Product is reflected by business cycle. Unemployment, inflation, and interest rate are three elements to Gross Domestic Product that effect the business cycle. The business cycle is a sequence of economic activity typically characterized by recession, fiscal recovery, growth, and fiscal decline (Reference for Business, 2007).
When the country’s Gross Domestic Product increases it causes an expansion in that county’s business cycle and when there is a decrease in a country’s Gross Domestic Product the business cycle goes into a recession like it is in our country currently. There are several roles the government bodies play in determining national fiscal policies and all roles have huge effects on the economy’s production and employment. Fiscal policy refers to the federal government and government bodies make decisions fiscal policies to maintain the country’s economy.
Taxation, government spending, and interest rates are roles government bodies deal with. Congress or the President needs are to approve fiscal policies. They have used fiscal policies to fight recession. Fiscal policies is constructed, managed, and implemented by The Department of Treasury. Implemented fiscal policies in the United States impact the behavior of Americans and alter production and employment. Fiscal policies effect the economy’s production and employment. Government spending reduces productivity and increases unemployment.
Excessive government spending makes everybody poorer (Joint Economic Committee, 2010). During a recession period government spending increases and taxes are lowered, which is involved in expansionary fiscal policy. Higher taxes cause lower resource production. Basically if taxes increase it will cause an income reduction leading individuals to spend less on consumption. Inflation occurs when government spending decreases and taxes increase. The business cycle experiences stages of recession, recovery, growth, and decline.
Taxation and government spending are use to shape our business cycle by causing it to experience different stages of the business cycle. The changes in price level and the real Gross Domestic Product is how the president and congress use fiscal policy to affect aggregate demand. Our economy goes through inflation each year by price increasing and experience long- run growth. References: Reference for Business. (2007). Business Cycle. Retrieved. Http://www. referenceforbusiness. com Joint Economic Committee. (2010). Government Spending. Retrieved. http://www. house. gov