{"id":2814,"date":"2023-02-19T16:10:51","date_gmt":"2023-02-19T16:10:51","guid":{"rendered":"https:\/\/content.one.lumenlearning.com\/introductiontobusiness\/chapter\/apply-it-2-4-macroeconomics\/"},"modified":"2025-05-12T12:31:11","modified_gmt":"2025-05-12T12:31:11","slug":"apply-it-2-4-macroeconomics","status":"publish","type":"chapter","link":"https:\/\/content.one.lumenlearning.com\/introductiontobusiness\/chapter\/apply-it-2-4-macroeconomics\/","title":{"raw":"Apply It 2.4: Macroeconomics","rendered":"Apply It 2.4: Macroeconomics"},"content":{"raw":"<section class=\"textbox learningGoals\">\r\n<ul>\r\n\t<li>Explain how gross domestic product (GDP) is used to evaluate the health of an economy<\/li>\r\n\t<li>Distinguish between monetary and fiscal policy<\/li>\r\n<\/ul>\r\n<\/section>\r\n<h2>Economic Growth<\/h2>\r\n<p style=\"text-align: center;\"><iframe src=\"https:\/\/data.worldbank.org\/share\/widget?end=2021&amp;indicators=NY.GDP.MKTP.CD&amp;locations=US-CN&amp;start=1960&amp;view=chart\" width=\"450\" height=\"300\" frameborder=\"0\" scrolling=\"yes\"><\/iframe><\/p>\r\n<section class=\"textbox tryIt\">[ohm2_question height=\"500\" hide_question_numbers=1]3301[\/ohm2_question]<\/section>\r\n<h2>Employment<\/h2>\r\n<div class=\"embed-container\">\r\n[caption id=\"attachment_9174\" align=\"aligncenter\" width=\"1024\"]<img class=\"wp-image-9174 size-large\" src=\"https:\/\/content-cdn.one.lumenlearning.com\/wp-content\/uploads\/sites\/15\/2023\/02\/12121611\/fredgraph-3-1024x418.png\" alt=\"Line graph titled &quot;All Employees, Feb 2020 = 100&quot; showing employment trends for three sectors\u2014Government, Goods-Producing, and Private Service-Providing\u2014from February 2020 to January 2025. The x-axis represents time, ranging from Feb 2020 to Jan 2025. The y-axis shows an index with a base of 100 in Feb 2020, ranging from 80 to 110.\r\n\r\nThree colored lines represent different employment sectors:\r\n\r\nBlue Line (Government): Declines sharply in early 2020 to below 95, remains relatively flat through 2021 and 2022, then gradually increases, reaching just above 100 by early 2025.\r\n\r\nPurple Line (Goods-Producing): Falls to about 88 in early 2020, then steadily rises and surpasses the 100 baseline around early 2022, continuing to increase moderately to about 104 by early 2025.\r\n\r\nRed Line (Private Service-Providing): Drops most sharply to about 83 in early 2020, then recovers steadily, surpasses 100 around mid-2022, and climbs to nearly 107 by early 2025.\" width=\"1024\" height=\"418\" \/> U.S. Employment from February 2020 to January 2025.[\/caption]\r\n<\/div>\r\n<p>FRED\u00ae Graphs \u00a9Federal Reserve Bank of St. Louis. 2022. All rights reserved. All FRED\u00ae Graphs appear courtesy of Federal Reserve Bank of St. Louis. <a href=\"https:\/\/fred.stlouisfed.org\/\">https:\/\/fred.stlouisfed.org\/<\/a><\/p>\r\n<section class=\"textbox tryIt\">[ohm2_question height=\"500\" hide_question_numbers=1]3304[\/ohm2_question]<\/section>\r\n<h2>Monetary and Fiscal Policy<\/h2>\r\n<section class=\"textbox connectIt\">The national debt is an issue debated not only in Congress, but by the public as well. Some believe that deficits contribute to economic growth, high employment, and price stability. Based on what you have learned about economics, what do you think?[footnote]Adapted from Gitman, Lawrence , Carl McDaniel, Amit Shah, Monique Reece, Linda Koffel, Bethann Talsma, and James Hyatt. \u201cIntroduction to Business.\u201d OpenStax, September 19, 2018. https:\/\/openstax.org\/books\/introduction-business\/pages\/1-5-achieving-macroeconomic-goals[\/footnote][reveal-answer q=\"126402\"]Click to See Opinion 1: Not Everyone Holds the Debt[\/reveal-answer]<br \/>\r\n[hidden-answer a=\"126402\"]The government is very conscious of who actually bears the burden of the national debt and keeps track of who holds what bonds. If only the rich were bondholders, then they alone would receive the interest payments and could end up receiving more in interest than they paid in taxes. In the meantime, poorer people, who held no bonds, would end up paying taxes that would be transferred to the rich as interest, making the debt an unfair burden to them. At times, therefore, the government has instructed commercial banks to reduce their total debt by divesting some of their bond holdings. That\u2019s also why the Treasury created\u00a0savings bonds. Because these bonds are issued in relatively small denominations, they allow more people to buy and hold government debt.[\/hidden-answer][reveal-answer q=\"937939\"]Click to See Opinion 2: Debt Crowds Out Private Investment [\/reveal-answer]<br \/>\r\n[hidden-answer a=\"937939\"]The national debt also affects private investment. If the government raises the interest rate on bonds to be able to sell them, it forces private businesses, whose corporate bonds (long-term debt obligations issued by a company) compete with government bonds for investor dollars, to raise rates on their bonds to stay competitive. In other words, selling government debt to finance government spending makes it more costly for private industry to finance its own investment. As a result, government debt may end up crowding out private investment and slowing economic growth in the private sector.[\/hidden-answer]<\/section>","rendered":"<section class=\"textbox learningGoals\">\n<ul>\n<li>Explain how gross domestic product (GDP) is used to evaluate the health of an economy<\/li>\n<li>Distinguish between monetary and fiscal policy<\/li>\n<\/ul>\n<\/section>\n<h2>Economic Growth<\/h2>\n<p style=\"text-align: center;\"><iframe loading=\"lazy\" src=\"https:\/\/data.worldbank.org\/share\/widget?end=2021&amp;indicators=NY.GDP.MKTP.CD&amp;locations=US-CN&amp;start=1960&amp;view=chart\" width=\"450\" height=\"300\" frameborder=\"0\" scrolling=\"yes\"><\/iframe><\/p>\n<section class=\"textbox tryIt\"><iframe loading=\"lazy\" id=\"ohm3301\" class=\"resizable\" src=\"https:\/\/ohm.one.lumenlearning.com\/multiembedq.php?id=3301&theme=lumen&iframe_resize_id=ohm3301&source=tnh\" width=\"100%\" height=\"500\"><\/iframe><\/section>\n<h2>Employment<\/h2>\n<div class=\"embed-container\">\n<figure id=\"attachment_9174\" aria-describedby=\"caption-attachment-9174\" style=\"width: 1024px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-9174 size-large\" src=\"https:\/\/content-cdn.one.lumenlearning.com\/wp-content\/uploads\/sites\/15\/2023\/02\/12121611\/fredgraph-3-1024x418.png\" alt=\"Line graph titled &quot;All Employees, Feb 2020 = 100&quot; showing employment trends for three sectors\u2014Government, Goods-Producing, and Private Service-Providing\u2014from February 2020 to January 2025. The x-axis represents time, ranging from Feb 2020 to Jan 2025. The y-axis shows an index with a base of 100 in Feb 2020, ranging from 80 to 110.    Three colored lines represent different employment sectors:    Blue Line (Government): Declines sharply in early 2020 to below 95, remains relatively flat through 2021 and 2022, then gradually increases, reaching just above 100 by early 2025.    Purple Line (Goods-Producing): Falls to about 88 in early 2020, then steadily rises and surpasses the 100 baseline around early 2022, continuing to increase moderately to about 104 by early 2025.    Red Line (Private Service-Providing): Drops most sharply to about 83 in early 2020, then recovers steadily, surpasses 100 around mid-2022, and climbs to nearly 107 by early 2025.\" width=\"1024\" height=\"418\" srcset=\"https:\/\/content-cdn.one.lumenlearning.com\/wp-content\/uploads\/sites\/15\/2023\/02\/12121611\/fredgraph-3-1024x418.png 1024w, https:\/\/content-cdn.one.lumenlearning.com\/wp-content\/uploads\/sites\/15\/2023\/02\/12121611\/fredgraph-3-300x122.png 300w, https:\/\/content-cdn.one.lumenlearning.com\/wp-content\/uploads\/sites\/15\/2023\/02\/12121611\/fredgraph-3-768x313.png 768w, https:\/\/content-cdn.one.lumenlearning.com\/wp-content\/uploads\/sites\/15\/2023\/02\/12121611\/fredgraph-3-65x27.png 65w, https:\/\/content-cdn.one.lumenlearning.com\/wp-content\/uploads\/sites\/15\/2023\/02\/12121611\/fredgraph-3-225x92.png 225w, https:\/\/content-cdn.one.lumenlearning.com\/wp-content\/uploads\/sites\/15\/2023\/02\/12121611\/fredgraph-3-350x143.png 350w, https:\/\/content-cdn.one.lumenlearning.com\/wp-content\/uploads\/sites\/15\/2023\/02\/12121611\/fredgraph-3.png 1140w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><figcaption id=\"caption-attachment-9174\" class=\"wp-caption-text\">U.S. Employment from February 2020 to January 2025.<\/figcaption><\/figure>\n<\/div>\n<p>FRED\u00ae Graphs \u00a9Federal Reserve Bank of St. Louis. 2022. All rights reserved. All FRED\u00ae Graphs appear courtesy of Federal Reserve Bank of St. Louis. <a href=\"https:\/\/fred.stlouisfed.org\/\">https:\/\/fred.stlouisfed.org\/<\/a><\/p>\n<section class=\"textbox tryIt\"><iframe loading=\"lazy\" id=\"ohm3304\" class=\"resizable\" src=\"https:\/\/ohm.one.lumenlearning.com\/multiembedq.php?id=3304&theme=lumen&iframe_resize_id=ohm3304&source=tnh\" width=\"100%\" height=\"500\"><\/iframe><\/section>\n<h2>Monetary and Fiscal Policy<\/h2>\n<section class=\"textbox connectIt\">The national debt is an issue debated not only in Congress, but by the public as well. Some believe that deficits contribute to economic growth, high employment, and price stability. Based on what you have learned about economics, what do you think?<a class=\"footnote\" title=\"Adapted from Gitman, Lawrence , Carl McDaniel, Amit Shah, Monique Reece, Linda Koffel, Bethann Talsma, and James Hyatt. \u201cIntroduction to Business.\u201d OpenStax, September 19, 2018. https:\/\/openstax.org\/books\/introduction-business\/pages\/1-5-achieving-macroeconomic-goals\" id=\"return-footnote-2814-1\" href=\"#footnote-2814-1\" aria-label=\"Footnote 1\"><sup class=\"footnote\">[1]<\/sup><\/a><\/p>\n<div class=\"qa-wrapper\" style=\"display: block\"><button class=\"show-answer show-answer-button collapsed\" data-target=\"q126402\">Click to See Opinion 1: Not Everyone Holds the Debt<\/button><\/p>\n<div id=\"q126402\" class=\"hidden-answer\" style=\"display: none\">The government is very conscious of who actually bears the burden of the national debt and keeps track of who holds what bonds. If only the rich were bondholders, then they alone would receive the interest payments and could end up receiving more in interest than they paid in taxes. In the meantime, poorer people, who held no bonds, would end up paying taxes that would be transferred to the rich as interest, making the debt an unfair burden to them. At times, therefore, the government has instructed commercial banks to reduce their total debt by divesting some of their bond holdings. That\u2019s also why the Treasury created\u00a0savings bonds. Because these bonds are issued in relatively small denominations, they allow more people to buy and hold government debt.<\/div>\n<\/div>\n<div class=\"qa-wrapper\" style=\"display: block\"><button class=\"show-answer show-answer-button collapsed\" data-target=\"q937939\">Click to See Opinion 2: Debt Crowds Out Private Investment <\/button><\/p>\n<div id=\"q937939\" class=\"hidden-answer\" style=\"display: none\">The national debt also affects private investment. If the government raises the interest rate on bonds to be able to sell them, it forces private businesses, whose corporate bonds (long-term debt obligations issued by a company) compete with government bonds for investor dollars, to raise rates on their bonds to stay competitive. In other words, selling government debt to finance government spending makes it more costly for private industry to finance its own investment. As a result, government debt may end up crowding out private investment and slowing economic growth in the private sector.<\/div>\n<\/div>\n<\/section>\n<hr class=\"before-footnotes clear\" \/><div class=\"footnotes\"><ol><li id=\"footnote-2814-1\">Adapted from Gitman, Lawrence , Carl McDaniel, Amit Shah, Monique Reece, Linda Koffel, Bethann Talsma, and James Hyatt. \u201cIntroduction to Business.\u201d OpenStax, September 19, 2018. https:\/\/openstax.org\/books\/introduction-business\/pages\/1-5-achieving-macroeconomic-goals <a href=\"#return-footnote-2814-1\" class=\"return-footnote\" aria-label=\"Return to footnote 1\">&crarr;<\/a><\/li><\/ol><\/div>","protected":false},"author":21,"menu_order":29,"template":"","meta":{"_candela_citation":"[{\"type\":\"copyrighted_video\",\"description\":\"The Global Economic Impact of Russia\\'s Invasion of Ukraine\",\"author\":\"Voice of America\",\"organization\":\"\",\"url\":\"https:\/\/www.youtube.com\/watch?v=oy0Mom-vcW8\",\"project\":\"\",\"license\":\"arr\",\"license_terms\":\"Standard YouTube License\"},{\"type\":\"cc\",\"description\":\"Intro to Business\",\"author\":\"Lawrence J. 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