Fundamentals of Macroeconomics

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Fundamentals of Macroeconomics
Part One
• Gross domestic product (GDP) The gross domestic product (GDP) is a measure of a country’s production that gives an analysis of how the economy is doing and how it relates to employment. In the United States, for example the gross domestic product is determines the market value of final goods and services produced within its borders. Prior to using the GDP, the United States used the gross national product (GNP) measure that accounted for goods and services produced by U. S. residents, including those working outside the United States borders. However, this did not give an accurate description of economic conditions within the country’s borders. Therefore, in 1991 the GDP became the official measure of the United States economy.
• Real GDP Real GDP is a measure of the value of goods and services produced using prices from a base year. This means it is adjusted for inflation to offer a more realistic analysis of how the economy is doing in comparison. Economists and government use Real GDP to compare the GDP in one year to past years to study trends in economic growth.
• Nominal GDP The nominal GDP measures the value of all the goods and services produced using current market prices. Nominal GDP leaves inflation in the calculations therefore giving a higher estimate than Real GDP. Nominal GDP determines the total value of goods and services produced in a country for a particular year.
• Unemployment rate The unemployment rate is the percentage of people in the economy who cannot find work even though they are willing and capable of working. This measure does not take into account those underemployed or who have become discouraged and quit looking for work. Therefore, an unemployment rate may not give a complete and accurate account of how many people are in need of suitable employment. Nonetheless, the…...

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