Fundamentals of Macroeconomics

Fundamentals of Macroeconomics

In order to understand what macroeconomics is and how it has an effect on our lives both personally and in business, we learn and understand some of the terms that have to do with it. The following are some of the terms that you would need to know, and what they mean, or at least the way that I understand them. Here is the list of terms and how I understand what each of them mean and what they are used for.

Gross domestic product (GDP) -This is how the market is valued and how it officially recognized all final goods and services that were produced within a country within a certain time period.

Real GDP -This is a measurement of value of the economic output and adjustments for any price changes that are needed.

Nominal GDP-This is a figure of the gross domestic product that has not be adjusted for inflation

Unemployment rate-These is the total amount of the labor forces that is currently unemployed, but is still actively seeking employment, and are willing to work.

Inflation rate-This is the rate over time of how much the price goes up for a service or a product.

Interest rate-This is the amount of money that is paid back to a lender by a borrower for the use of the money.

Once we have an understanding of these terms and how they affect the economy and how they are used. Next we can look at some different example of economic activities and each of these affect the government, households, and business. The examples that we will use to do this activities example will be as followed. Example 1: Purchasing of groceries, example 2: Massive layoff of employees, and example 3: Decrease in taxes. By using these three examples we will describe the flow resources from each of the entity for each of the activities.

The first example that we will look at is the purchasing of groceries and how it has an effect on all three activities. The purchasing of groceries has an effect on every household because this priority that cannot do without or ignored. Due to the fact that every household has to make sure that they have an enough to feed everyone in their house so if there is any increase in prices due to inflation then they will not spend the amount of money on the groceries as they would do normally. Purchasing groceries as an effect on the government because they can set the market prices and they can also set area when certain groceries can be sold and when they can be sold. Another way that it will affect the government is because if a household cannot afford to buy enough groceries to feed their families they will need to turn to the government for assistance to buy the amount of groceries needed. The last activity that we have to look at for this example is how a business would