Fundamentals of Macroeconomics

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Fundamentals of Macroeconomics Paper
Chad Jones
ECO/372 Principles of Macroeconomics
April 23, 2012
Tom Hodgkiss

In the world of economics, understanding many terminologies can enhance one’s ability to be successful with consumers’ patterns of using goods or services and how those factors affect the economy when they are produced, distributed, and consumed. Gross Domestic Product or GDP is the official measure of goods and services produced in a specified period, within a country. Real GDP measures the value of goods and services expressed in prices of a base year. Nominal GDP measures the value of goods and services expressed in current prices. The unemployment rate is an occurrence of a lack of jobs, which analysts calculate by dividing the number of people unemployed by those people currently in the workforce. The inflation rate is a measurement of the percentage rate of price level changes or increases of price indexes, usually over a period of one year. An interest rate is the rate set by a lender to pay back money the borrower requested (Colander, 2010). Many economic activities exist that affect different areas concerning the state of the economy. When consumers purchase groceries they are making a dual investment by supporting businesses in the economy and investing in their immediate households by providing the basic needs for their families. The business who supplies products becomes a benefactor by providing goods, services, and jobs to individuals in the community. The government is ultimately affected when a community has stable resources from which individuals are fed and employed. When those resources become scarce the government experiences the effects over the long-run. Declines in consumer purchases constitute basic needs are not satisfied based on changes in expenditures that demonstrate an example of the multiplier effect. According to Colander (2010), “If the price level in the U.S....
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