Describe the use of Gross Domestic Product (GDP) to measure the business cycle
It is undeniable that the Gross national product can be used to measure the business cycle. The gross national product has occasionally been used to assess the US economy for a long time. This is as far as the health of the economy is concerned. The business cycle has been measured by changes in the real gross domestic product. The business cycle revolves around economy-wide fluctuations and this is as far as production is concerned (Neil, 1998, p. 23). In this case, it is easy to measure the business cycle based on various fluctuations in the economy’s gross national product. The concept of the real gross national product can be used to measure business cycles broadly.
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An economy’s GDP is dependent on the output that is produced. This output depends on the prevailing business cycles and this means that it will be easy to measure how these cycles are moving. For instance, there are occasions where the economy’s output might be growing or shrinking (Eggert, 1997, p. 27). This can therefore be used to evaluate the prevailing business cycles in the economy based on various changes in output.
Business cycles and gross national products are broadly intertwined and connected and this is indisputable. In this case, we can easily measure an economy’s business cycle by looking at the changes in real GDP. Business cycle fluctuations can be predicted based on real GDP trends.
Describe the roles of government bodies that determine national fiscal policies
Government bodies have been instrumental in determining national fiscal policies and this is undeniable. In this case, there is the department of the treasury that has been very important as far as national fiscal policies are concerned. The department of the treasury is responsible for managing and constructing the general fiscal policy. It is also tasked with the implementation of fiscal policy. Another government body is the office of management and budget. This office is responsible for the development of fiscal policy. It is also tasked with the analysis of fiscal policy that has been developed (Neil, 1998, p. 34).
The office of the president of the United States of America is also an important government body that has always determined fiscal policy. In this case, it is in charge of the decision making of fiscal policy and this has been done as time goes by. The government accountability office is another government body that has played a key role in national fiscal policy. The body is in charge of auditing fiscal policy and it has done this very well.
Explain the effects of fiscal policies on the economy’s production and employment. How do changes in government spending and taxes positively or negatively affect the economy’s production and employment?
Fiscal policies have an impact on the general decisions that will be made by businesses and individuals and that is why it affects an economy’s production and employment. For instance, any change in taxes will affect the net income and this changes the cost of production. Organizations will look at their profitability in the labor force. Wholesomely, any changes in taxation will ultimately affect the employment market.
From a broad perspective, productivity and efficiency are also affected (Neil, 1998, p. 29). Fiscal policies can affect production through interest rates. Adjustments in interest rates can affect the movement of cash and this can be reflected in production. It should be known that any changes in government spending will ultimately affect production and this is indisputable. An increase in taxes will reduce production and employment. This is as far as incomes are concerned. When individuals have less income, they will not spend and this will reduce demand for goods and services thereby reducing production. If companies are not producing goods well, they will not employ and vice versa.
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Eggert, J. (1997). What is Economics? Mountain View, CA: Mayfield Publishing Company.
Neil, B. (1998). Public Finance and the American Economy. Reading, MA: Addison- Wesley.