Fundamentals of Macroeconomics
• Gross domestic product (GDP)- Gross domestic product is a country’s economic indicator. GDP measures the total output of services and products from boarder to boarder of the country. GDP is a measuring of the economy within a time period of the country.
• Real gross domestic product (RGDP)- This adjusts inflation measures of the real value of products, services, and goods produced in a year. Real gross domestic product accounts for changes in price levels to provide more accurate data.
• Nominal gross domestic product (NGDP)- Determines the gross domestic product without factoring in inflation or other variables of the total gross domestic product.
• Unemployment rate- This measures the total percentage of a countries population who is unemployed and searching for work.
• Inflation rate- the rise in cost of services and goods without a rise in percentage to purchase the goods or services.
• Interest rate- money charged by a lender for principal of money loaned for using the assets. Interest rates vary on different loans and borrowers.
The choices businesses, families, and government make have an impact on the strength of the economy. These same choices will also affect the flow of resources. So for example, take a family who makes the choice to buy food. The family will purchase groceries, which are exchanged for money. This in returns will allow the grocer to purchase more wholesale goods, therefore selling more merchandise in the store. In addition that money that the grocer spends allows wholesalers and distributors to pay employees and to make payments to manufacturers for the product. However, the chain does not end there; the manufacturers have to get resources from farmers. Through the entire chain of purchasing, each transaction or sale is taxed, and the government is getting their share. The government decides the taxes on groceries by the supply and demand. So in the end, the grocery shopping is done does impact families, businesses, and the government from a financial standpoint. The flow of resources with the purchase of groceries is in a circular flow. The firms produce the groceries using factors of production owned by households. Therefore, the production generates income both to businesses and households. In addition, there is a flow of consumer goods from the businesses to the households. This is a flow of services from the households to the businesses. The government in the form of taxes receives from both the households and the business. Massive layoffs of employees is one way that a business’s uses to cut some of their operation expenses. Massive layoffs affect household in several ways. It reduces the household’s disposable income therefore limiting their purchasing. The result is the country economy will suffer as people cannot put money back into the economy. Businesses are affected by massive layoffs as one effect is an increase in operational cost that incur from recruiting, developing, and training new employees. In some cases the laid off employee may file lawsuits against the business, which can cause the company extra expenses in settlements and payments. The government is also affected by massive layoffs of employees as it leads to an increase in spending for the government. If there is a massive layoff the government would have to in turn use taxpayer’s money to pay for the increase in unemployed workers. The flow of resources from a massive layoff is from the government to the household. The government provides unemployed workers with unemployment insurance benefit. This in
