Eco 372 Week 2

Fundamentals of Macroeconomics ECO/372 Version 4 11/03/2013

Part 1

Macroeconomics includes a variety of terms relevant to its study. The following terms help identify key factors that influence the U.S. economy. The Gross Domestic Product (GDP) is a measure of a country’s value based on goods produced, services rendered, government spending, and the difference of exports minus imports. The Real GDP is the measure of the output of GDP
This information influences whether businesses will save or invest, hire or fire, and survive or die. The Nominal GDP is a little different in such that the change in price is not accounted for. Unemployment rate refers to the percentage of the American population that is eligible to work but are current jobless. Inflation rate is the percentage change in the increase of the price of goods and services. Interest rate is defined as the annual percentage divided by the principle balance owed monthly on borrowed money. Economists use gross domestic product, unemployment rate, and interest rates as tools to determine economic trends and predict the future changes in the economy. They try to manipulate the frequency, duration, and extremes of those changes; a never-ending effort to minimize the roller coaster effect. Following is a list of loose definitions for those tools. The gross domestic product is expressed in two terms, real GDP or nominal GDP. The real GDP has been adjusted to account for inflation, and the nominal GDP has not been adjusted. Economists use the Real GDP to show practical relevance and to allow a comparison of apples to apples over time. Household consumption, firm