Fundamentals of Macroeconomics
Cynthia Banks
ECO/372
September 30, 2013
Ron Merchant
Fundamentals of Macroeconomics
The following are important terms related to what has been learned so far in our Macroeconomics class. When thrown together, I have found some of them to be a bit confusing. I have had to read things a few times to get a real picture on what they mean, and what they mean to me. It has been nice to separate them and dive into them individually. It is easier to understand when I laid them out like this. These terms have become a bit more relevant to me recently as I have applied some of what I have learned here to some of the politics going on right now.
GROSS DOMESTIC PRODUCT
Gross Domestic Product (GDP) can be defined as the value, in market terms, of all goods and services produced in a country in a given period of time. This number can be taken as a barometer for a country’s standard of living, though this isn’t an indicator of personal income. GDP per capita measures the gross domestic income per capita. GDP can be equated in three different ways. The product approach totals the outputs of all classes of enterprise. The expenditure approach goes on the assumption that all products must be bought by someone. The income approach relies on the principle that incomes of the producers must be the same as the value of their product. GDP is the total of all producers’ incomes.
REAL GDP
The main examples of Real GDP are inflation or deflation. “It is the value of any economic output that has been adjusted for changes in price.” (Colander, 2010) This number accounts for price level changes. It provides more accurate figures. An example, there is an increase in price levels over a two year period totally $30 billion. So the real GDP for that two year period is the nominal GDP minus $30 billion. Real GDP reflects the price level changes.
NOMINAL GDP
Also known as “current dollar GDP”, this figure is not adjusted...