The Fundamentals of Macroeconomics
Before being able to grasp what economics has to offer it is important to understand the terms and concepts that are frequently used in economic. This paper will consist of two parts, part one will explain six terms; gross domestic product (GDP), real GDP, nominal GDP, unemployment rate, inflation rate, and finally interest rate. Part two will consist of describing how three economic activities, such as purchasing of groceries, massive layoff of employees, and decrease in taxes. There will also be a few different examples that affect government, households, and businesses.
(Part one)
Start by describing the six economic terms.
Gross domestic product (GDP) is the most used economic measure when it comes to determining the value of goods and services that are produced in a given year (Colander, 2010). There are four categories to GDP's consumption, government spending, investments, and net exports. The GDP reflects the total amount of both goods and services that were bought and sold, and there for can measure a country standard of living. It does not account for any goods or services that they may have in other countries.
Real gross domestic product (RDP) is the final value that is given to a product or service based on the current economy. This type of GDP adjusts with the price levels in order to produce a more accurate number.
Nominal gross domestic product (NDP) is the gross domestic product without taking into account inflation and can be misleading because appear to be higher than it really is because it has not been adjusted for inflation.
Unemployment rate is the amount of people that are not employed and are looking for work. This reflects only the people who are ability to work, willing to work, and are looking for employment.
Inflation rate is a level price of goods and services increasing. Inflation causes the value of the dollar to...