Macro-Economic Indicators: GDP, CPI, and Unemployment

Macro-Economic Indicators: GDP, CPI, and Unemployment

Introduction

The paper aims at explaining various macroeconomic indicators and their importance in an economy. The paper provides brief answers to the asked questions regarding GDP value and effect of different activities on GDP. In addition to this, the paper describes inflation and deflation phenomenon and why it causes win/lose situation. The paper discusses natural rate of unemployment and structural unemployment and factors that might cause these types of unemployment. Finally, the paper provides conclusion on the overall understanding of these macroeconomic indicators.

Q. 1 (a) - Value of DGP

Under Expenditure Approach:

 

Value of GDP (Y) = Consumption (C) + Investments (I) + Government (G) + Exports (Ex) - Imports (Im)

 

 

Y=

1000+500+280+300

 

Y=

2,080

 

Table 1: Value of GDP (Rittenberg & Tregarthen, 2009, p. n.d.)

Q. 1 (b) - Affect on GDP under Given Scenarios

The term Gross Domestic Product (GDP) refers to the market or monetary value of goods and services, which are produced domestically within a given time period. There are four basic components and factors that affect the value of GDP including investments, consumption, government spending, and net exports (i.e. exports less imports) (Lochner, 2011).

Purchase of Used Textbook

An act of purchasing a used textbook from classmate is less desirable to affect the value of GDP. It is an educational resource, which can improve the efficiency of capital structure; however, it cannot make a viable or economic contribution to the GDP because it is neither classified as investment nor consumption (Rittenberg & Tregarthen., 2009).

Purchase of New Umbrella

The purchase of new umbrella can be classified as personal consumption, which is an important component of GDP. Hence, purchase of new umbrella will affect the GDP by increasing its value (Lochner, 2011).

Haircut in a Foreign Salon

Amount of money paid or received on hair cut is considered as a part of GDP value. Hence, it will affect the GDP (Cliffs Notes, n.d.).

Oklahoma Cleans-up

Since the city clean up is made after a natural calamity i.e. tornado, the expenditure on clean up will be recorded as government spending on city infrastructure and development. Hence, cost incurred in cleaning up the city will positively affect the GDP (Lochner, 2011).

Pension Payment

Pension payment to retired military personnel might not have a direct impact on the GDP value; however, it can affect indirectly. Since pension funds are submitted to the state government, it can have indirect impact on GDP by increasing the income level for government (Boyes & Melvin, 2010).

Q. 2 - Concept of Inflation and Deflation

Inflation

The term 'inflation' refers to persistent increase in the general price of goods and services. Inflation refers to a situation where purchasing value of money is declining with increasing prices of goods and services (Rittenberg & Tregarthen., 2009). It is an economic phenomenon that changes value of each dollar held by an individual. The inflationary factor causes benefits and loss for a particular group of people. For instance, elite and rich people can gain the most from inflation because they are less affected by inflation due to excess ...