Ken Thompson
08/05/2013
Blake Bennett
Table of Contents
I. Introduction II. Define and Explain the Following Terms
A. Gross Domestic Product (GDP)
B. Real GDP
C. Nominal GDP
D. Unemployment Rate
E. Inflation Rate
F. Interest Rate
III. Explain How These Activities affect Government, Households, and Businesses A. Purchasing of Groceries B. Massive Layoffs of Employees C. Decrease in Taxes III. Conclusion
Introduction In this paper for the fundamentals of macroeconomics, I will be discussing gross domestic product (GDP), real GDP, nominal GDP, the unemployment rate, the inflation rate, and the interest rate. Along with those terms, I will explain how …show more content…
The best way to understand a country’s economy is to look at the GDP. The GDP measures all of the output for the country and includes everything produced in that country. Gross domestic product is estimated in three ways and they are; expenditure basis, which is how much money was spent, output basis, which is how many goods and services, were sold, and income basis, which is how much income, was profited. Define and Explain Real GDP Real gross domestic product is by assessing the market prices of a certain year while taking inflation into factor. A company could use the real GDP to suggest the standard of living within a country so it can help the company decide whether or not that their products will be successful. An example of how you get the figures is to choose a base year such as 2005, taking the quantities of all the goods and services purchased in 2013 and multiplying them by their 2005 prices figure out then the real GDP for 2013. Define and Explain Nominal GDP Nominal GDP measures the value of all goods and services produced in the current price without taking inflation or deflation into hand. When doing the nominal GDP, the GDP will look higher than it actually is due to not taking inflation into …show more content…
When this happens, the standard of living is harder. With inflation rates growing, the dollar buys less, so you have to spend more money to get the same goods and services. There are three causes for inflation. Demand-pull is one which happens when demand for goods and services rise, but supply stays the same. Cost-push is the second and it is caused when supply of goods and services is controlled for a reason and the demand stays the same. Overexpansion of the money supply is the third and this is when the capital in the market does not take advantage of