An economy is a robust set of inter-related production and consumption activities that assist in the determination of the scarcity and surplus of goods and services. For instance, when there is an overproduction and the demand for the goods is low, economist refers this to as a surplus in the goods. However, if the need for the same products is higher than the production, then this is termed as a scarcity of the goods. In some cases the supply and demand of goods and service may be the same; this is referred to as the state of equilibrium. The economy has two categories, and they are the macro economy and the micro economy. Macro economy is a field that studies the behavior of the cumulative economy. It scrutinizes widespread occurrences such as the unemployment rate, the gross domestic product (GDP), national income, price levels, and also the inflation rate. Micro economy is a branch of economics that deals with the study of human behavior and the decision-making process of business entities regarding the distribution of scarce resources.
The real gross domestic product measures the value of the output of the economy and how the prices are adjusted to accommodate the changes. The alteration of the rates alters the value of the money and the nominal gross domestic product into an index for the quantity of the total output (Saylor.org, 2011). Even though the gross domestic product is a measure of the total production, it is important since it is a close approximation of the total amount spent by individuals. The gross domestic product is a sum of the total consumer spending, industrial investments, an excess of the exports as compared to the imports and government spending. T...
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...ing more as the money available to them increased.
Another article in the New York Times dated February 26th, 2013 elaborated that the Fed was setting to expand its bond holdings by making purchases worth $85billion every month to encourage lending and borrowing. It would do so until there was a noticeable progress in the labor market. At the time, the securities that the Fed had amassed were at $3 trillion. Mr. Bernanke observed that the Fed’s monetary policy was supporting the recovery of the economy, and he was doing a commendable job. Some Republican senators challenged this observation by countering that the policies were degrading the worth of investments in the long term. Currently, the low-interest rates created by the Fed’s intensive spending were encouraging high risk-taking endeavors by investors, which was not a very positive sign of a developing economy.
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