Macro Economics

Macro Economics

Part 1

Gross Domestic Product (GDP)

Gross Domestic Product is considered one of the indicators that reflect the situation of the economy. It depicts the total value of the goods and services that are produced within the country in a particular time (Brezina, 2012).

The calculation of the Gross domestic product includes the public and private consumption, the spending of the government, investments that reflects the country's spending on the capital for the business, and the net exports which is exports deducting the imports from it. Though it measures the nation's productivity but it is difficult to comment on its accuracy as everything cannot be covered and the changes in the prices are not taken into consideration. The formula is given below

GDP= Consumption + Government Spending + Investments + (Exports - Imports)

Real GDP

Unlike the Gross Domestic Product (nominal), the real GDP takes the account of the inflation when the economic output is being calculated, in a specific year that are also expressed as the base year price (Chamberlin & Yueh, 2006). The Real GDP is said to be more accurate as this takes the price level changes into consideration. The differences in the real GDP from year to year will denote the changes in the output. This also helps in analyzing the country's purchasing power as the real GDP divided by the population will result in the real GDP per capita.

Nominal GDP

Nominal GDP is the same as Gross Domestic Product. It is the market value of all the produced goods and services within the territory (Arnold, 2010). Though it incorporates various factors but leaves out the consideration of inflation.

Unemployment Rate

One is considered to be unemployed who is searching for job as he is currently jobless or unemployed. The unemployment rate is all the people that are without job or unemployed with the relevance to the people that are included in the labor force or employed. When the economy is in recession, the country will be experiencing high unemployment rate (Arnold, 2010).

There are different types of unemployment and some of them are

Cyclical

As the aggregate demand falls, many individuals lose their jobs. This type of unemployment is also called Demand deficient unemployment.

Structural

Some industries decline due to the long term changes that occur in the market conditions.

Seasonal

This is when the unemployment occurs at a particular time of the year. Some of the industries that are affected by it are tourism, farming and seasonal food products.

Frictional

When ...