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Fundamentals of Macroeconomics Essay

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Fundamentals of Macroeconomics
November 19, 2012

Fundamentals of Macroeconomics
A productive and sustainable economy is made of many activities that work in harmony.   These chain-wise activities depend on each other and an increase or decrease on one would affect the other activities, and therefore the economy.   For better and clearer understanding of the economy, economists divided the economic theory in two parts; Microeconomic and Macroeconomic.   "Microeconomics is the study of individual choice, and how that choice is influenced by economic forces... and Macroeconomics is the study of the economy as a whole" (Colander, 2010, P. 15).   Macroeconomics refers to overall resources that use for the economy as a whole, and deals with concepts such as economic growth, business cycles, inflation, and unemployment (Colander, 2010).   In this paper after reviewing definition of some economic terms, we discuss some of the macroeconomic activities, and their impacts on government, households, and businesses.
• Gross Domestic Product (GDP,) is the yearly value of all the goods and services produced in a country.
• Real GDP, is an evaluator that calculates the GDP based on the market price on previous years without the effect of price change.
• Nominal GDP, is an evaluator that calculates the GDP at current market price, which include any inflation or deflation.
• Unemployment Rate, is a percentage for people who do not work due to changes in economy, business status, recession, etc.   It is a rate for people who are unemployed, but in search for employment.
• Inflation Rate, is a measure for increase in price level for products and services.
• Interest Rate, is a percentage that is charged on loans (loans such as credit loan, car loan, mortgage, etc.,) usually calculated annually and known as APR.
Economic Activities
The main sectors of an aggregate economy (households, government, and businesses) interact in a variety...

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