Individual Fundamentals of Macroeconomics Paper
Part 1
Gross domestic product (GDP) – GDP is the total market value of all final services and goods produced in a given year in a given country.
Real GDP – Real GDP is the result of the production activity within a given country at a specific years prices. If one compares two or more periods of time using the same year’s prices for goods and services then the result is a purchasing power comparison as seen over time. This happens because the inflation effects have been mitigated by using constant prices.
Nominal GDP – Nominal GDP is simply GDP that has not been adjusted for inflation. Nominal GDP does not reflect purchasing power but does show how an economy has expanded and contracted in dollars.
Unemployment rate – The most basic definition of an unemployment rate is those people who are unemployed but are actively seeking work and willing to work. It is typically expressed in the form of a percentage.
Inflation rate – inflation is usually expressed in an annual percentage and is the price increase for goods and services.
Interest rate – An interest rate is the percentage of the principal funds that is charged and paid for the use of money. It is expressed as an annual percentage rate (APR) for loans and annual percentage yield (APY) for interest earned.
Whether one is experiencing a decrease in their taxes, is part of a massive layoff of employees, or is simply purchasing groceries, there is a resource flow from one entity to another and back again. Those entities cover government, businesses, and households. How those resources ebb and flow will differ with each situation and have an impact in a “trickle-down” effect from the government to businesses and finally to households.
Decrease in Taxes
When the Government decides to reduce taxes, the tax typically assumed to see the reduction is the income tax. “According to the Internal Revenue Service (IRS), approximately
Gross domestic product (GDP) – GDP is the total market value of all final services and goods produced in a given year in a given country.
Real GDP – Real GDP is the result of the production activity within a given country at a specific years prices. If one compares two or more periods of time using the same year’s prices for goods and services then the result is a purchasing power comparison as seen over time. This happens because the inflation effects have been mitigated by using constant prices.
Nominal GDP – Nominal GDP is simply GDP that has not been adjusted for inflation. Nominal GDP does not reflect purchasing power but does show how an economy has expanded and contracted in dollars.
Unemployment rate – The most basic definition of an unemployment rate is those people who are unemployed but are actively seeking work and willing to work. It is typically expressed in the form of a percentage.
Inflation rate – inflation is usually expressed in an annual percentage and is the price increase for goods and services.
Interest rate – An interest rate is the percentage of the principal funds that is charged and paid for the use of money. It is expressed as an annual percentage rate (APR) for loans and annual percentage yield (APY) for interest earned.
Whether one is experiencing a decrease in their taxes, is part of a massive layoff of employees, or is simply purchasing groceries, there is a resource flow from one entity to another and back again. Those entities cover government, businesses, and households. How those resources ebb and flow will differ with each situation and have an impact in a “trickle-down” effect from the government to businesses and finally to households.
Decrease in Taxes
When the Government decides to reduce taxes, the tax typically assumed to see the reduction is the income tax. “According to the Internal Revenue Service (IRS), approximately
References: Richard Coultier, Do Tax Cuts Stimulate the Economy? (June 23, 2010) Retrieved on January 23, 2012 from http://www.investopedia.com/articles/07/tax_cuts.asp#axzz1kIPnIgcg The Reason Foundation, Privatization and Layoffs (March 1, 2001) Retrieved on January 23, 2012 from http://reason.org/news/show/privatization-and-layoffs