Essay about funndumentals of macro economy

Submitted By Hakop87
Words: 854
Pages: 4

Fundamentals of Macroeconomics

ECO/ 372

November 12, 2013

Kimberly Hlaing

Jason Hakop Grigoryan


Colander said that the gross domestic product is the market value of goods or services that was introduced into the economy in a span of one year.


Also known as GDP which has four components that goes into it; the components are cumulative of all finished goods from public consumption, total government spending, the total amount of country’s spending on capitals, and lastly net exports. Net exports are calculated by using a formula that is total worth of exports subtracted by the total amount of imports. Gross domestic products are also consisted of supplies and services which are generated with limitations inside United States, despite of the manufacturer’s ethnic group. There are two features of GDP, the flow process that is associated by timing and sums of the total amount produced by a country within one year period. The second feature of the GDP is the measurement of the final output of a product which does not include any transitional goods that are produced by the final output of the manufactured goods. GDP is the gross domestic product in continuous dollars. A gross Domestic product calculates the nation’s productivity of goods and services, and it is adjusted in order to comply with pricing changes. GDP helps economist to make value comparisons of the country’s output services and it helps to adjust the inflation. The formula to used is real GDP=nominal GDP/GDP deflator (price index).

Nominal GDP helps to measure the current dollar it is the gross domestic product without taking in count of the inflation. Nominal GDP is the total sum that shows how much the economy has grown or has declined in the dollar amount.

Keynesian economist doesn’t believe that market forces alone automatically change the unemployment rate. Back in 1930s during the Great Depression classical economist said the wages were too high, they believed that employees were getting paid too much for the amount of work that he/she was doing. At the time the idea was if the government was to lower the wages, unemployment would fall and more businesses can hire workers and this would lead to the end of the great depression. On the other hand Keynesian economists though differently, they believed that the government should take over and control; and make decisions about the economy in order to manipulate market forces. They also argued when wages are adjusted to price the levels in the market it changed the way money was being spent and it decreased investments demand. The idea is that if people have less money this will logically make them spend less as well. This can also mean that when people have less money to invest it will give people the chance to save more money. When people save more money they are not spending money this causes lower level of production. This cycle actually will put the economy under recession because no one is buying goods or services. The Keynesian gave this problem a solution using a method called aggregate demand management. They though that to take the economy out of recession, the entire population must help and contribute to the cause. Under the aggregate demand management theory, government takes control and aggregate the level of spending by the