Fundamentals of Macroeconomics

Fundamentals of Macroeconomics

Macroeconomics by definition refers to the study of the performance, structure, and behavior of the economy as a whole. Macroeconomics studies economies at the national, regional and global levels. Macroeconomics takes into consideration some important economic indicators in order to study and understand how a given economy functions (Macroeconomics 2013). Some of those economic indicators that are:

• Gross domestic product (GDP) - it refers to all of the goods and services produced within a given country in a given time period.

• Real GDP - similar to (GDP), but with the exception that the real GDP takes into account price fluctuations of goods and services produced that are associated with inflation

• Nominal GDP- knows as “current dollar GDP” nominal GDP represents the GDP figures that have not been adjusted for inflation.

• Unemployment rate- this figure represents the total number of unemployed workers that are actively seeking additional employment

• Inflation rate- when the inflation rate increases, it means that the prices of goods and services increases, and subsequently the purchasing power of the currency is falling.

• Interest rate- it refers to the amount of money a lender charges the borrower for the use of their money. Interest rates are typically calculated and represented on an annual basis or annual percentage rate (APR).

Examples of common economic activities

Economic activities can be described as the set of activities that are carried out by consumers in order to meet and satisfy their needs. These activities have one purpose that purpose is to produce the goods and services that people need or wish. These activities can be divided into three major categories (What are Economic Activities 2013):

• Production- this includes all activities carried out in order to produce the goods and services that people need.

• Commercialization and distribution- this category includes all activities intended to bring the goods and services produced out to the consumer.

• Consumption- in simple words, the consumers have acquired the needed goods and services and are consuming them.

With every economic activity that takes place, there are three major entities that will be affected by such activities; the government, consumers, and business will all be directly affected by them. Below we will discuss three examples of economic activities, and how they affect government, households and business:

• Purchasing groceries- purchasing groceries is probably one of the most