Fundamental of Macroeconomics Paper

Fundamentals of Macroeconomics

The average American remains unaware of activities happening within the government that involves the public on a day-to-day basis. It is important to be educated on key terms as well as examples of economic activities. This paper will discuss; Gross Domestic Product (GDP), Real GDP, Nominal GDP, Unemployment Rate, Inflation Rate, and Interest Rate. Then these terms can be related to economic activities. Purchasing of groceries, massive layoff of employees, and decrease in taxes will be the three economic activities discussed as well as their affects on government, households, and businesses.

First, learn the key terms. According to "Investopedia" (2007), Gross domestic product “represents the total dollar value of all goods and services produced over a specific time period.” This helps determine how the country is doing. Real GDP is a bit different. Real GDP is the inflation adjusted GDP that measures all goods and products in a year. There is also another form of GDP. Nominal GDP is the opposite of real GDP. It is GDP that has not had inflation adjustments. A key term most people are more familiar with is the unemployment rate. Unemployment rate is the percentage of people who are unemployed but actively looking for work. An important term that would better explain the GDP is the inflation rate. (This is an incorrect assumption. The inflation rate explains the price level and not GDP. ) Inflation rate is the rate that goods and services are increasing. (What rate increase are you referring to?) Finally, the last term would be interest rate. Most people are familiar with interest rates because of mortgages or car payments. Interest rate is when a lender places a percentage charge on an amount given to the borrower.

Once the terms have been defined the next topic of importance would be to discuss three types of economic activities. These activities are the purchasing of groceries, massive layoff of employees, and decrease in taxes. These economic activities affect the government, households, and businesses but how so? (Do not ask questions in your paper. Instead make statements to improve the flow and readability of your paper.)

First, start out by discussing the purchasing of groceries. This primarily affects a household. Every household requires