Macroeconomic Factors That Affect An Economy - 967 Words

Introduction The article highlights macroeconomic factors that affect an economy. Microeconomic factors like Gross Domestic Product(GDP), Monetary policy, Fiscal Policy, Interest rate, Inflation, Deflation, Unemployment, economic growth etc. Many people accept inflation as a fact of life but sometimes under some economic circumstances opposite situation take place, which we call† Deflation†. It is also known as Negative Inflation Rate (when inflation rate decreased below 0%). Moreover, deflation is an indication of declining economic condition. Answer-1 Definition: â€Å"Deflation is the reduction of prices of goods means general price level in the economy falls (Hubbard, 2013)† Expalanation Deflation and disinflation both are different from each other. In the case of Disinflation, inflation rate is decreasing to lower rate while in the case of deflation; inflation is decreasing to below 0% means negative. During the economic depression when the demand for goods and services is lower and unemployment is also high at that time deflation usually happens. (Mankiw, 2012) Deflation is not good for the borrower of the money because deflation increase the debt burden (Hubbard, 2013). And it increase the real value of money which is currency of regional or national economy.In the deflation purchasing power of the consumers increase they starts buying more goods and services with the same amount of money overtime.but it’s a big problem in the moderneconomy because it increase the realShow MoreRelatedMacroeconomics : Economic Factors That Affect The Economy1927 Words   |  8 Pages Macroeconomics concentrates on the issues that affect the economy in its entirety. It particularly focuses on economic factors such as inflation, unemployment and economic growth. 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