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Fundamentals of Macroeconomics

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Fundamentals of Macroeconomics paper

This paper will consist of two separate parts, the first part will be defining six terms which are; * Gross domestic product (GDP) * Real GDP * Nominal GDP * Unemployment rate * Inflation rate * Interest rate
The second part will consist of three different economic activities in which I will describe how each affects the government, households, and businesses. The three activities include; purchasing of groceries, massive layoff of employees, and decrease in taxes.
The first term is Gross domestic product (GDP). The GDP has been used as an indicator as to how well an economy is growing and the overall well-being of the economy at hand. The GDP can be used as evidence for classifying economies into different groups based on growth. The GDP reflects the total amount of both goods and services that were bought and sold and therefor can measure a country standard of living. When the GDP rises, the assumption is that the economy is growing, because the GDP is the total value of all products that are bought and sold.
The second term is real gross domestic product (GDP). The real GDP is expressed in base-year prices meaning that this measure is inflation-adjusted and will reflect all of the goods and services that were bought and sold in a given year. The real gross domestic product can take into account the changes in price levels in order to produce a more accurate number.
Nominal gross domestic product (GDP) is the gross domestic product figure before accounting for and adjusting for inflation. Nominal GDP figures can be somewhat misleading in the sense that the figure will appear to be higher than it really is because it hasn’t been adjusted for inflation. Here is an example of how the nominal GDP can be misleading, if the nominal GDP grows a total of 10% and the inflation rate was 4%, the real GDP

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