Fundamentals of Macroeconomics Paper

Fundamentals of Macroeconomics Paper

Introduction

Gross domestic product (GDP): The simple definition of Gross domestic product is, “The total market value of all final goods and services produced in a given year”. It is the measure of an economy's performance in terms of goods and services that it has produced. The aggregate output includes the production that is citizen supplied as well as foreign supplied.

Real GDP: The heterogeneous total that gives us the GDP of a certain economy is measured in terms of monetary value, but the change in the value of money due to inflation or deflation disturbs the comparison of GDP from year to year. Thus, adjustments are made like to deflate GDP when prices increase and inflate GDP when prices fall to get the real measure of GDP. This adjusted GDP is called the real GDP.

Nominal GDP: As mentioned above that GDP is measured in monetary value, but comparisons cannot be made from one year to another since the value of money itself changes due to inflation and deflation. Thus, the GDP that is calculated without adjustments is called the Nominal GDP.

Unemployment rate: It is the measure of the total labor force that is unemployed; this is measured as a percentage which is calculated by dividing the number of people unemployed with the number of people in the civilian labor force. For the measure of the unemployment rate, first of all it is to be determined that who is eligible and available to work. People under 16 years of age or the ones who are institutionalized for e.g. in mental hospitals are not considered as members of labor force. The labor force includes people who are actively looking for work because; the ones not seeking work are termed as discouraged workers and are also not a part ...