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Macroeconomic Impact on Business Operations
Introduction
One of the main objectives for those in positions of influence in the United States is to keep the nation's economy healthy. In an effort to do so, the Bureau of Economic Analysis has been authorized and charged with monitoring economic conditions. Several factors are analyzed by the BEA to help them determine the current state of the economy. Such factors include the gross domestic product, inflation, unemployment, and interest rates. Based on their analysis, economic strategies and policies are created to help maintain a healthy economy. A strong economy is a result of understanding each factor and strategically implementing them correctly.
Gross Domestic Product
According to McConnell and Brue (2004), the gross domestic product is "the total market value of all final goods and services produced in a given year" (p. 112). A final good is defined as an item purchased for final use by a customer and not for resale. The GDP excludes any nonproduction transactions, such as stock market transactions and social security payments. The gross domestic product is measured on the monetary value of the goods produced or the "market value" and does not consider the actual number of items produced. Several factors should be considered when measuring the GDP, but essentially there are two ways to determine the output; the expenditures approach and the income approach.
Inflation
"Inflation is a rise in the general level of prices" (McConnell & Brue, 2004, p. 141). Rises in inflation cause a devaluation of the dollar and reduce the consumers purchasing power. However, a rise in inflation does not mean ...