Impact of Macroeconomics on the Housing Industry Essay

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To better understand the real impact macroeconomics has in an economy or a particular industry, it is better to define what macroeconomics is and what it attempts to study. Contrary from microeconomics which studies the impact that individuals or companies have in a local economy, macroeconomics focuses on the behavior of the economy or industries as a whole, in a national or global perspective. (Investopedia.com, 2015) However, microeconomics and macroeconomics are interdependent and complement each other. Because of the ultimate relationship that these factors have on each other, what happens in one ends up affecting the other and vise versa. Macroeconomics study changes that affect such things as unemployment, national…show more content…
(Investopedia.com, 2015) Moreover, it is critical that individuals, government and corporations understand the causes of price cycles in the housing industry and how to effectively implement measures to help moderate these price cycles to maintain macroeconomic stability.
According to Loungani, (2010) “Robert Shiller is well known for predicting the U.S. stock market crash of 2000–01. In 2003, he warned that U.S. house prices too contained a “bubble”; that is, they had risen far beyond what was warranted by fundamental driving forces such as income growth, interest rates, demographic change, and building costs.” (pg. 16) This is a clear example of how macroeconomic volatility affects the housing industry as well as other industries that feed off of the housing industry such as construction.
Macroeconomics stability is important and it plays a critical part for the nation involved and the global community, this is why the government will sometimes use monetary policies to manipulate or stimulate the economy depending on its state. When there is a need to increase cash in the economy, the central bank or the Federal Reserve will buy government bonds and by doing so, it would cause interest rates to go down. (Investopedia.com, 2015) “Demand for goods and services will rise and, as a result, output will increase. In order to cope with increased levels of production, unemployment levels should fall and wages should rise”.
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