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Fundamentals of Macroeconomics
ECO/372
November 21, 2013

Fundamentals of Macroeconomics
After finishing Week One of our Principles of Macroeconomics course, we were given an assignment in which we show how well we understand and describe key terms we discussed during class in our own words. Terms such as; Gross domestic product (GDP), Real GDP, Nominal GDP, Unemployment rate, Inflation rate, and Interest rate. The second part of this assignment is describing economic activities such as Purchasing of groceries, Massive layoffs of employees, and Decrease in taxes, affects our government, households, and businesses. We also need to describe the flow of resources from one entity to another for each activity.
Let’s begin first by describing each term in our own words. Gross Domestic Product, or GDP, shows how well a country’s economic health is, and gauges its standard of living. This is all based on the monetary value of all the finished goods and services produced within that country. The GDP is usually calculated on an annual basis. Nominal GDP, also known as current dollar GDP, is the country’s GDP that has not been adjusted for inflation. Without accounting for inflation, the GDP figure can be very misleading because the GDP will appear higher than it actually is. Real GDP, often referred to as inflation-corrected GDP, is the inflation-adjusted GDP, and unlike nominal GDP, real GDP can account for changes in the price level and can provide a more accurate figure. The Unemployment rate is the country’s percentage of total labor force that does not have a job. Although hard to say, these labor force with no jobs are actively seeking employment and are willing to work. The unemployment rate is considered a lagging indicator, confirming but not foreshadowing long-term market trends. An Inflation rate is the rate at which the persistent increase in

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