Eco/372 - Gdp

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Submitted By mdaniels1981
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Gross domestic product (GDP) – Is the total market value of goods and services that are produced in a certain time frame.

Real GDP – Is the same as above, but measured yearly at consistent values.

Nominal GDP – Same as above, but measured at current values.

Unemployment Rate – This is the measurement of individuals who are not working during the measured time. They may be willing to work but are not able to find work.

Inflation Rate – The inflation rate is affected by the GDP and the result is a price increase for goods and services.

Interest rate – is a rate that a lender sets for a borrower to pay back when taking out a loan, the decision of approval is dependent on several factors and the same factors can determine the interest rate the lender wants the borrower to pay.

When considering the three economic activities (purchasing groceries, massive layoff of employees, and decrease in taxes) you will find that it is a circular motion where each activity has an effect on the others, causing each entity (government, business, household) to feel the effects. Think about a small town that survives on farming and a local paper mill as the citizen’s livelihood. Now take a look at purchasing groceries, we can see how it affects each entity in different ways. This economic activity would affect the government (local, state and federal) because we pay taxes on groceries and the items we do not pay taxes on are inflated to make up the difference, so the government is taking their share of the “pie”. Farmers, suppliers, manufactures, and their employees are all affected because a certain amount of the money we pay for these products goes to them; they get their share of the “pie”. Now imagine that the paper mill has to reduce its production due to slow demand, which means that they will have to reduce their force to keep the doors open. Laying off half their…...

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