Fundamenndamentals of Macroeconomics

Fundamenndamentals of Macroeconomics

In evaluating the fundamentals of Macroeconomics, a basic understanding of the basic terms that describe economics is essential. Terms such as Gross domestic product GDP, real GDP, nominal GDP, unemployment rate, inflation rate, and interest rate are key components to leveraging this understanding. By explaining such terms, it is easier to notice and understand the impact that economics has on daily activities such as purchasing groceries, employee layoffs, and even decreases in taxes.

When defining the Gross Domestic Product, this term is describing the amount that people either earn or spend within a given year. The GDP, therefore, is very important is evaluating a country’s economic climate and potential for the future. (Investopedia 2012). The Real GDP factors in the cost of inflation within a particular time period and adjusts the GDP accordingly. Inflation refers to the rise and fall of the price of goods and services within an area. Therefore, the inflation rate measures the rate or amount (frequency) of this rise and fall. In contrast to real GDP, the nominal GDP does not factor in the cost of inflation and can sometimes reflect a higher amount than what is reality.

The employment rate can be defined as the amount of people within a particular area that currently have a job and are working. The unemployment rate then refers to those who are not currently working, but are ready, willing, and able to do so. This rate is very important to the understanding of economics because it speaks to a country’s ability to provide work for its inhabitants.

The term interest rate is another important term in understanding economics because it refers to the amount of money that one must pay to buy goods or spend money in general. This is a key component to understanding economics because the frequency of this rate determines the worth of ones money as a whole.

In evaluating how economics affects daily activities such as the purchase of simple goods such a s groceries, economics plays a major role in the cost associated with simply feeding ourselves and our families. When the inflation rate, unemployment rate, and taxes are low in a region, people can purchase groceries easier. However, when any of these economic factors rise, then the purchase of such groceries can become more difficult. A high unemployment rate in an area creates the need by consumers to purchase groceries at a