Fundamental of Macroeconomics Essay

1038 WordsDec 16, 20125 Pages
Fundamentals of Macroeconomics ECO/372 November 26, 2012 John Ilokwu Fundamentals of Macroeconomics Many forms of economic data make up the fundamentals of macroeconomics. It is important to understand the terms, such as GDP, unemployment rate, inflation rate, and interest rate, and how different economic activities can affect the flow of resources among different entities. Gross domestic product (GDP) is the total market value of all goods and services produced in a certain time period. Its scope is according to the location. The GDP is sometimes considered a reflection of the standard of living for a country. There are three ways to determine GDP, which are the product approach, the expenditure approach, and the income approach. There are two primary measures of GDP, which are nominal GDP and real GDP. Nominal GDP is determined at the current market prices. Any changes in the market prices that happened within the current year from either inflation or deflation are included. Real GDP is determined using the market prices of a particular base year. For example, if 1980 was picked as the base year, then the real GDP for 1986 is calculated by multiplying the total of goods and services purchased in 1986 by the 1980 prices. The unemployment rate is reflected as the percentage of the total civilian labor force unemployed at a given time. It does only include those seeking employment and willing to work. This certainly means that it may be higher because it does not include the people who are not out searching for work. The unemployment rate is calculated by taking the number of people who are employed and dividing it by the total number of people in the civilian labor force. The inflation rate is used to measure inflation. It also can be described as the rate of increase of any price index, like consumer prices for example. The

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