Fundamentals of Macroeconomics

850 WordsDec 16, 20134 Pages
Benson James ECO 372 Fundamentals of Macroeconomics 08 October 2013 The gross domestic product (GDP) is defined as the market value of all goods in any country at any specific time. The gross domestic product is frequently used to establish a country’s wealth or standard of living. Even though the GDP is supposed to determine a country’s economic health, many nonbelievers think the gross domestic product does not account for the underground economy. An underground economy would consist of transactions that are no reported to the government. The first thing that comes to mind as an example would be restaurant servers. Not all restaurants require servers to claim all of their tips.…show more content…
They can do this by offering goods and services at a discounted prices or creating temporary sale items to compete. Massive layoff of employees can affect household because it will decrease the amount income each household brings in. When a household does not have a regular income, it affects the way they spend their money. Households will have to cut costs and budget their money wisely. When massive layoffs take place is has a great affect on the government as well. The government has to compensate for the large number of recently unemployed people. This increases government spending dramatically because now they have to use money for people who are collecting unemployment rather than on something else. Since households have less income, they are unable to put their money back in the economy. Even though businesses are saving on their own costs by laying off employees, they are not bringing in as much because people have less disposable income. When there is a decrease in taxes, households have a greater income which in turn allows them to spend their money at business. When households have a higher income, it lessens the amount of money the government has to provide for households. Business will be able to stay competitive in the market because people will have more money to spend on their goods and
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