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Macroeconomics - Article Example

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Economics is that branch of social sciences that looks at the production, distribution and consumption of goods and services. The two main branches of economics are microeconomics and macroeconomics.
Microeconomics deals with the decisions at small scale…
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Download file to see previous pages It deals with the aggregated indicators such as price indices, GDP, unemployment, inflation, savings, investments, national income etc. It looks at prices of all goods and of all services. In short, it looks at whole economy. Macroeconomics also deal with the exchange rates. The higher will be the exchange rate, the lower will be the international demand due to expensive products.
Macroeconomics deals with the critical economy issues such as inflation rate, unemployment rate, recession state etc. Recession is a period of two or more successive quarters of decreasing production. Scarcity of any resource becomes a cause of rise in price while access availability of any resource causes a fall in price of that commodity.
Before we discuss U.S inflation, we must know the role of inflation. Inflation is basically an increase in average price level of a country while deflation is totally opposite to inflation. Deflation is the downward decrease in average prices level. Inflation in United States is also due to record oil prices that had increased the petrol price. Inflation is also caused by excessive money creation. Consumer Price Index (CPI), Consumption Expenditures Index (CPI) are tools to keep a check on average prices. One must thoroughly look into the average rise case because rise in the price of any one commodity may also cause a rise in price index. An average rise in the prices of food and beverages, apparel, energy prices, education, transportation, housing etc shows the horrible picture. As Inflation decreases the money value, countries consider it as a key issue. Change in prices of goods and services at domestic level is also measured by GDP deflator. Demand-pull inflation, Cost-push theory (Supply shock inflation), Money Supply etc are the causes of inflation in a country.

Economy of United States is also known for being rich in mineral resources and fertile farm soil. Five large, inland lake flow along with the US border with Canada. That has been a reason of economic growth in the last few years and maintained a high overall GDP rate, a low unemployment rate but in the end of 2007, growth was hit by the troubles in the housing and credit market.

Unemployment is also considered as one of the key factor in macroeconomics. Unemployment refers to people who are jobless and are seeking some work.
The unemployment rate is obtained by dividing the number of unemployed persons by the number of persons in the labor force. It is mostly expressed in percentage as its value is less than one. It has been suggested that US growth could be cut to nearby 1.5% in 2008. Unemployment is also higher than it was at the end of the last boom in the l990s. The fall in the value of US dollar is also a hot topic nowadays. The Federal Reserve has cut rates in 2008 to control the situation. Investors seem least interested in dollar due to lower interest rates and due to significant trade deficit. ...Download file to see next pagesRead More
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