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Understanding Macroeconomics and its Bearing on Your Profitability

When last did you visit a fueling station? When last did you visit a market to buy groceries and supplies? When the price of a thing you want to buy rises, you suffer as a consumer. But why is the price increasing? As you were taught in high school economics, is there more demand than there is supply? Is it more expensive because of the raw materials required to create it? Is the price affected by a war between Russia and Ukraine? 

The macroeconomic concept seeks to understand how global characteristics of economic growth and business fluctuations are determined: volumes of the main aggregates (production, consumption, and investment), and the unemployment rate.

It frequently focuses on specific variables perceived to be important in determining the outcome: capital accumulation, income distribution, aggregate demand, operation finance, and so on. Many economists, from ancient times to the present, have chosen or are choosing to create macroeconomic knowledge only through macroeconomic observation as it appears in statistics or national accounts. 

This is because macroeconomics stems from a global perspective. However, there are two issues with such a direct inductive approach. First and foremost, macroeconomic statistics are derived from the observation of actual evolutions rather than controlled experiments. The dynamic nature of global economies doesn’t allow for injections of new proposals to help analyze the economic structure; rather, the free-living and ‘uncontrolled’ economies, after being carefully observed, give off statistical data and affect the everyday operations of even local markets.

When we talk about inflation, we mean a general increase in the level of prices and salaries. The sequence of events that come from such an increase, as well as those that precede and support it, is well known. The various prices and wage rates are gradually raised, with each increase providing justification for the next. When inflation becomes significant, it becomes a self-sustaining process known as the "inflationary spiral."

The most significant notion in macroeconomics is "gross domestic product" (GDP) output, which refers to the entire amount of goods and services produced by a country (GDP). This number represents a snapshot of the economy at a certain point in time.

When discussing GDP, macroeconomists typically use real GDP, which takes inflation into account, as opposed to nominal GDP, which merely shows price increases. If inflation rises from year to year, the nominal GDP figure rises, but this does not necessarily imply increased output levels, merely higher prices.

‘’During the late 1930s and the war years that followed, economists generally expected the saving rate to climb as people got more prosperous.

That rise in savings did not occur. Even while salaries climbed dramatically in the 1960s and the proportion of males over 65 who were still working fell to less than half of what it had been in the 1920s, the aggregate saving rate did not rise appreciably. This was also the time when social security was launched and rapidly expanded. It should be noted that early American Keynesians such as Seymour Harris (1941)’’.

Demand ultimately dictates output. Consumers (for investment or savings, residential and commercial), the government (spending on goods and services for federal employees), and imports and exports all contribute to demand.

However, demand alone will not determine how much is produced. What people demand is not always what they can afford to buy, so measuring a consumer's disposable income is also necessary to estimate demand. This is the amount of money left over after taxes for spending and/or investment. The question is, how many Nigerians have disposable income?

It differs from discretionary income, which is after-tax income-less payments to maintain a person's quality of living.

Wages must be specified in order to compute disposable income. Salary is determined by two factors: the minimum wage for which employees will work and the amount companies are ready to pay to retain the employee. Given that demand and supply are inextricably linked, wage levels will suffer during periods of high unemployment and prosper during periods of low unemployment.



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