Question

Hello,

I need at least 250 words essay on these:

What is the role of firms in our macroeconomy?

Do consumers indirectly and/or directly affect our macroeconomy?

Discuss how microeconomics and macroeconomics affect the flow of money within the Circular Flow Model.

Do you think firms could operate without households? Describe how these disciplines relate to the Circular Flow Model.

Answer 1

The first essay is done for you :

What is the role of firms in our macro economy?

Answer : Firms employ different factors of production , thus generating employment in the economy . They assimilate these factors of production ( such as labor , capital , land ) in right proportion to create products in most cost efficient manner . So, firms generate income for households , rent for land owners , interest payments for capital owners etc . They invest in technology since firms use labor and capital as much profitably as possible . Investment in research and development is done by firms to find out more cost effective modes of production which leads to revolution in production modes and better utilization of resources .The total production of firms create the aggregate supply in the economy which has a huge role in determining aggregate price level . Firms pay corporate taxes which generates income for government . Lastly, firms produce a plethora of goods and services and leads to specialization in the economy by engaging different workers in different sections of work . Specialization leads to comparative advantage in production which further reduces cost of production . Primarily we can say in a macro economy a firm produces goods and services for households and provides factor payments to households .

Along with these two primary functions , a firm performs other functions discussed above . A firm also invests in cleaner modes of production , thus protecting the environment , buy insurance which creates flow of money in other sectors of the economy , takes loans which helps in credit creation etc .