Macroeconomic Indicators (Essay Sample)

Macroeconomics
Student’s Name
Institution
Macroeconomics
Macroeconomics is an aspect related to a large economy, and it affects the whole population instead of individuals. Macroeconomic features encompass unemployment, interest charges, inflation and balance of payment position, and inflation. This essay discusses the major macroeconomic factors and how they affect the economy: Furthermore, it reveals the causes of some macroeconomic factors such as the budget deficit.
Q1.
First and foremost, I would select inflation because it affects other macroeconomic factors and the whole economy. Furthermore, inflation rates influence the amount of money that people save, and it also affects individuals' purchasing power (Kennon, 2016) Inflation also causes unemployment because it reduces people's purchasing power which makes companies have little profits. Organizations mainly retrench their employees when they earn less revenue for an extended period. Furthermore, it leads to unemployment because the expense of employment becomes very high to companies. Secondly, I will choose unemployment because it is one of the primary measures for defining a country's economic health. Economists reveal that unemployment is a lagging pointer of the economy. Stable unemployment levels are not unhealthy for a country's economy, but high unemployment level negatively affects the economy because it leads to higher unemployment benefits and lower taxes which force a government to borrow money.
Q2.
A budget deficit occurs when the government’s revenue is much lower than its expenses. Deficit spending forces a government to borrow funds from private organizations hence forcing a country to go in debt (Economics, n. d). High debts force the government to increases taxation charges because it would want to use the revenue to pay back its loans. Deficit spending also leads to high-interest charges because the government will want to attract borrowers. Lastly, deficit spending results in very high inflation rates which discourage entrepreneurship and the cost of living. Therefore, deficit spending is eventually harmful to the economy.
Q3.
Without money, everything will be expensive because individuals will commence using barter trade which is very costly because it leads to a massive wastage of time and resources. For instance, barter trade forces people who are far apart to travel distances so that they can meet and exchange their goods (Banerji, 2016). Travelling is time-consuming because it wastes a lot of resources. Nations such as Zimbabwe which have high inflation levels resort to using the United States (US) dollar because the dollar is stable compared to their currency which is so volatile and valueless. The lack of value in these countries’ currencies makes it impossible for them to import goods from other nations because most countries reject the useless money. Therefore, with the US dollar, these countries can import products from other nations.
Q4.
Many developing and third world countries' Gross Domestic Product (GDP) greatly depends on land fertility because these nations depend on agriculture as the primary source of revenue and employment. However, developed countries become rich with little or no agricultural land because their economies do not rely on agriculture as the main source of income. These countries depend on banking and manufacturing sectors as their primary source of revenu