Fundamentalsof MacroeconomicsFundamentals of Macroeconomics
Curtis L Wilson III
October 29, 2012
Fundamentals of Macroeconomics
There are many fundamentals of Macroeconomics that are extremely important to the U.S. economy. In this paper I will explain the Gross domestic product (GDP), the Real GDP, the Nominal GDP, the Unemployment rate, Inflation rate, as well as the interest rate. Going forward I also will explain the following economic activities; purchasing of groceries, massive layoff of employees, decrease in taxes and how these activities affect the government, households and businesses. I also will describe the flow of resources from one entity to another for each of these activities.
The Gross domestic product is basically the current market value of all goods and services that were produced within a country. The Real GDP is the gross domestic product that has been adjusted for the impact of inflation. The Nominal GDP is considered the GDP evaluated at current market prices. It includes all the changes in market prices due to inflation or deflation in the current year. The Unemployment rate is the percentage of the total workforce who is currently unemployed and is looking for an income paying job. The Unemployment rate is heavily analyzed because a rising rate is a sure sign of a struggling economy, which will call for a cut in the interest rate. If the unemployment rate were to fall that would indicated a rise in the economy followed by higher inflation rate and will call for an increase in interest rates. An Interest rate is the rate of interest paid to the lender from the borrowers for borrowing a set amount of money. It is a specific percentage of the principle paid at competitive rate for a period of one year. For example, if a small company borrows money from a bank to buy some items for their business, in return the lender receives interest at a detailed rate for loaning the funds to the borrower. The Inflation rate is the increase in...