Situations §

Situation A

You are the manager of a plumbing supplies firm. New home construction is at its highest level for four years. How would the building boom effect (a) your level of inventory (b) the size of the orders you lodge with suppliers, and (c) the size of your business loans.

How would the building boom effect; (a) Your level of inventory > Inventory / stock would decrease quickly due to the increased demand for plumbing supplies during a building boom. (b) The size of the orders you lodge with suppliers > I would place larger orders with suppliers since I would want to meet the further demand for plumbing supplies in the future. (c) Size of your business loans > Business loans would get bigger as I take out loans to pay for these bigger orders, since I would expect there to be demand.

Situation B

You own a restaurant. How would an economic downturn affect the number of customers who make bookings; the number of staff you employ; and the quantity of food and beverage you order from suppliers each week?

How would an economic downturn affect; (a) the number of customers who make bookings > there would be less bookings as people reduce their discretionary spenidng, and you can make food at home instead, eating out is discretionary. (b) The number of staff you employ > due to less bookings and lower revenue from less bookings, less chefs are needed, so I would employ less chefs. (c) The quantity of food and beverage you order from suppliers each week? > I would palce smaller orders in to my suppliers of food, beverage, and equipment

The Reach of changes in Aggregate Expenditure §

As demonstrated above, a change in aggregate expenditure propagates throughout the whole economy. Macroeconomics is the study of the whole economy - The study of economic aggregates, like;

• Production of output (O)
• Earning of Income (Y)
• Spending of that Income as Expenditure (E) When Aggregate Expenditure (AE) rises, Output, Income, and GDP must also rise. When AE falls, ⬇Output, ⬇Income, and ⬇Employment