Fundamentals of Macroeconomics

Fundamentals of Macroeconomics Paper

This paper will give you the writer's definition of terms in part one and describe the effects of certain economic processes. It will attempt to cover much of the areas affected by the actions however, this will be difficult as there are so many entities involved in today's markets that it would be impossible for all of them to be mentioned. In any case, the greater, more obvious ones will be covered.

Terms

PART 1

* Gross domestic product (GDP) - Gross domestic product is the total amount of aggregate sold by a single economy or country for that year without inflation factored in.

* Real GDP - Real GDP is the total amount of aggregate sold by a single economy or country for that year with inflation factored in.

* Nominal GDP - This is the same as GDP. It does not have inflation factored in it.

* Unemployment rate is the number of people in an economy who can work divided by the number who are not working and multiplying that by 100.

* Inflation rate - The inflation rate is the measurement of the price of a group of commonly purchased items by a given sector of population, then dividing that by the cost of the same items from the year before or base year and multiplying that by 100 to give you the percentage of inflation for that year.

* Interest rate - The interest rate is the amount of money paid to the lender for borrowing the money, usually calculated annually and expressed in percentage.

Effects

PART 2

* Purchasing groceries provides the government money through taxes and data to measure the country's economic position. It also provides households with required items for survival and a choice of standard of living. Businesses depend on these purchases since each item purchased requires the services of many businesses which in turn require employees thus keeping the economy alive. Government gets tax money from each entity in the process. The effect of this extends further to the investors of all the businesses producing the groceries, lending institutions, insurance companies and anything remotely involved in the production, communication, sale and transport of the grocery item both domestic and foreign are all affected by the purchasing power of the consumer.

* Massive layoffs require the government to analyze the cause of the layoffs and develop processes and policies to prevent this in the future. It also requires the government to determine how to put these people back to work so these people can pay taxes rather than draw money from the governmental agencies. The household is effected since