Question

1.Identify three macroeconomic variables in the United States that impact the supply and/or demand of the product or service produced by the company you selected for your microeconomic/macroeconomic analysis papers. ( Walmart's Neighborhood market is the service)

*I have identified Inflation, Unemployment and Interest rate but would like some insight on each element and sources to cite if possible.

2. Interpret the trends of the three selected macroeconomic variables for the past three years and evaluate how these trends will likely impact the supply and demand of your chosen product or service as well as the financial performance of your chosen company. (Walmart's Neighborhood market is the service)

I need some ideas here and some citation sources as well.

Answer 1

1. Inflation erodes wealth of people and reduces their real income. Therefore, inflation reduces purchasing power. A fall in purchasing power results in a drop in the demand for goods and services sold by Wal-Mart. Therefore, high inflation will reduce demand and low inflation will increase demand.

Higher unemployment rate means loss of income of many people. The unemployed will demand fewer goods and services because of fall in purchasing power. In addition, higher unemployment will reduce demand for goods and services for the employed people as well as they would be more cautious about spending and save more. A higher unemployment rate will reduce demand for goods and services of Wal-Mart and a low unemployment rate will increase demand for goods and services of Wal-Mart.

Interest rates affect demand as well as the supply of goods. Higher interest rates make various loans like mortgage loans, automobile loans, credit card debts, etc. costlier. Therefore, higher interest rate reduces the disposable income of people and makes them spend less. On the other hand, higher interest rate reduces borrowing by firms and this prevents firms from expanding capacity and producing higher output. So, the supply of goods and services also fall. A lower interest rate increases demand as well as the supply of goods and services.

References:

• Bizfluent. (2018). The Effect of Interest Rates on Inflation & Unemployment. [online] Available at: https://bizfluent.com/info-7745833-effect-interest-rates-inflation-unemployment.html [Accessed 4 Jan. 2018].
• Maverick, J. (2018). Which economic factors most affect the demand for consumer goods?. [online] Investopedia. Available at: https://www.investopedia.com/ask/answers/042815/which-economic-factors-most-affect-demand-consumer-goods.asp [Accessed 4 Jan. 2018].
• eduCBA. (2018). Macroeconomics Problems | Interest Rate Inflation & Unemployment. [online] Available at: https://www.educba.com/macroeconomics-problems/ [Accessed 4 Jan. 2018].