May 2, 2013
Week 2 Individual Assignment
The study of macroeconomics, although valuable information, can be hard to understand if the terminology is not understood. In any type of economic study, understanding gross domestic product, inflation rate, unemployment rate, models, and building blocks plus many more terms essentially will determine the viability of any recommendations made.
Gross domestic product stands for the total amount of final goods and services produced. When calculating the gross domestic product, items produced must be put into like measurement to achieve the total. The total of gross domestic product involves not only the amount of goods produced but also measures the production of those goods and services.
Nominal gross domestic product is the calculations of the domestic product using the existing prices. The gross domestic product is figured by the prices of the product or services in the year it is calculated So in one respect there is really no difference in the two except for any price increase from one year to the next.
Real gross domestic product is the nominal gross domestic product amount that has been adjusted for inflation. This adjustment is made by finding the amount of price increase from one year to the next, divide the nominal gross domestic product by the determined price and multiply by 100.
Unemployment rate is the percentage of people in an economy that are willing and able to work but who do not have jobs. The government takes responsibility for unemployment since 1946 and factor into that percentage 2% of people who are considered unemployables. Unemployables are people of society like alcoholics and drug addicts who normally do not hold down a job.
Inflation rate is continual rise in the price level. If the prices raise, kit is very difficult to know if this is a one-time increase or not. If it is a one-time increase, it is not inflation. It must be determined if the price will be continually increasing.
Interest rate is the price charged for the use of a financial asset. For example, if a person acquires a loan from the bank they must pay interest on the loan. The interest is an amount the bank charges for taking the risk of making the loan along with covering the amount of time it will take a person to repay the loan.
All the above terms will be found in the study and practice of macroeconomics. The effect of each will be felt in many different ways, which we will look at next.
Most people do not stop and think about the activities that are done during a normal day and how those activities affect the economy. Following the resources for different activities will show the affect, so there are three activities to discuss; purchasing groceries, massive layoffs of employees, and decreases in taxes.
Purchasing groceries: First, start with the company you work for who provides goods or services. The company provides an income which will be used to purchase the groceries and other items the individual or family needs. From the paycheck earned from the business, taxes for federal, state, and social security are taken out for the government. The goods the store provides comes from many resources starting at the agricultural level. Farmers produce goods that are sold to producers to make other products that are sold to distributors or directly to the store. Once these goods get to the store, they are paid for from the income the store makes by selling them to their customers. Farmers must do business with companies that help them grow their crops. So every product relates to a business that produces the product and all of these business, companies, and individual provoke the government tax money that is used to keep the economy moving and hopefully growing. The tax dollars collected help the government provide services to businesses to allow them to stay viable in the markets they are in. Government tax dollars are used to…