Reference no: EM131326581

Macroeconomics is designed to help us better comprehend the full nature of the economy on a national scale and how the government is involved (D.Andolfatto, 2008).  Two macroeconomic variables that would affect the business environment would be Unemployment and Consumption / Saving.

Unemployment affects business since if someone is not working they would not have funds to spend on specified products thus causing sales to go down and contributing to the deterioration of the economy. Fortunately in America the government has programs and agencies in place to keep families feed and able to survive until they are back on their feet such as welfare, unemployment supplication pay, and food stamps.  Unemployment has been a emergent problem the last few years due to the economy waning to failing banks and wall-street, sorry to say many people take advantage of this and use these benefits as a way of life rather than a stepping stone to get back on track and that is called Unemployment Insurance Fraud (CA.gov, 2016.).

Consumption and Savings refers to people who have money but tend to be more considerate on what they do with it. For instance, like going out and splurging on a vacation or saving your money in the bank for the future when you plan on retiring or a child college fund.  Andolfatto states "decisions that households make in an assortment of contexts--such as decisions concerning consumption, savings, investments in education and training" (D.Andolfatto, 2008).  People around the world are preparing their futures and will not just squander their money so easily and that has an impact in the business environment.  Hence when gas prices went up people were not as likely to go driving far places all the time because of it and that would hurt business all around the nation that normally rely on tourists. Even as the winter approaches the south we now have to negotiate how much power we plan on using to warm up our houses. The power companies will be faced with a dilemma if people start using alternate forms of energy such as wood burning heaters and generators to power things around the house.

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Thank you for your posting. In your posting you make note of saving and consumption. And those are the two things that households can do with their after-tax income.  Now suppose the economy is in a severe recession and the federal government tries to stimulate the economy by cutting personal income taxes. Why might this approach not be effective in stimulating the economy?