Fundamentals of Macroeconomics Eco372
University of Phoenix
ECO/372 – Principles of Macroeconomics
Individual: Fundamentals of Macroeconomics
Instructor: Robert Watson
08 June 2013
Donna Montante
Describe the following terms in your word. • Gross domestic product (GDP) The total market value of all final goods and services produced in a country in a given year, equal to total consumer, investment and government spending, plus the value of exports, minus the value of imports.
• Real GDP Real variable, such as the real interest rate, is one where the effects of inflation have been factored in. Real Gross Domestic Product measures the worth of all the goods and services produced stated in the prices of some base year.
• Nominal GDP A nominal variable is one where the effects of inflation have not been accounted for. The Nominal Gross Domestic Product measures the worth of all the goods and services produced stated in current prices.
• Unemployment rate Unemployment occurs when a person is laid from an employer or is seeking employment without success. The unemployment is used to measure the condition of the economy. This measurement is known as the unemployment rate. It is calculated by dividing the number of individuals on unemployment by the number of individuals in the labor force.
• Inflation rate It is based on the rising price of good and services and falling purchasing power. This measurement shows how fast currency loses value. This is calculated by how fast prices for goods and services rise over time, or how much less one unit of exchange buys now equated to one unit of exchange at a given time in the past.
• Interest rate The annualized cost of credit or debt-capital calculated as the percentage ratio of interest to the principal. Each bank can regulate its own interest rate on loans but, local rates are about the same from bank to bank. In overall, interest rates rise in times of
ECO/372 – Principles of Macroeconomics
Individual: Fundamentals of Macroeconomics
Instructor: Robert Watson
08 June 2013
Donna Montante
Describe the following terms in your word. • Gross domestic product (GDP) The total market value of all final goods and services produced in a country in a given year, equal to total consumer, investment and government spending, plus the value of exports, minus the value of imports.
• Real GDP Real variable, such as the real interest rate, is one where the effects of inflation have been factored in. Real Gross Domestic Product measures the worth of all the goods and services produced stated in the prices of some base year.
• Nominal GDP A nominal variable is one where the effects of inflation have not been accounted for. The Nominal Gross Domestic Product measures the worth of all the goods and services produced stated in current prices.
• Unemployment rate Unemployment occurs when a person is laid from an employer or is seeking employment without success. The unemployment is used to measure the condition of the economy. This measurement is known as the unemployment rate. It is calculated by dividing the number of individuals on unemployment by the number of individuals in the labor force.
• Inflation rate It is based on the rising price of good and services and falling purchasing power. This measurement shows how fast currency loses value. This is calculated by how fast prices for goods and services rise over time, or how much less one unit of exchange buys now equated to one unit of exchange at a given time in the past.
• Interest rate The annualized cost of credit or debt-capital calculated as the percentage ratio of interest to the principal. Each bank can regulate its own interest rate on loans but, local rates are about the same from bank to bank. In overall, interest rates rise in times of
References: Colander, D. C. (2010). Macroeconomics (8th ed.). Boston, MA: McGraw-Hill/Irwin. Library of Economics and Liberty - http://www.econlib.org/library/sourcesUS.html