Economy: Fundamental of Macroeconomics Essay

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Economic Definitions

• Gross Domestic Product (GDP) is the total value of a countries products and services produced over a year.
• Real GDP is GDP adjusted for price changes.

• Nominal GDP is GDP adjusted for inflation.

• Unemployment Rate is the percentage of the work force that is currently not working.

• Inflation Rate is the rate at which goods and services rise in cost over a period of time.

• Interest Rate is the rate at which interest is paid by a borrower over a period of time.

Economic Activities

The economy is like an intricate machine with many moving parts that affect the output of the machine. If any of these parts are damaged, they affect the overall performance of the machine. In order to understand how the economy
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Inflation rate is the rate at which goods and services rise in cost over a period. Finally, interest rate is the rate at which interest is paid by a borrower over a period.
Households, businesses and the government are the major players in the economic machine (Colander, 2010). When an economic activity takes place, such as buying groceries, layoffs or a decrease in taxes, these activities can have an effect on all three entities. Households is where the labor forces come from which are paid by businesses (Colander, 2010). Businesses produce goods and services, which in turn are sold back to households and the government (Colander, 2010). The government buys the goods from businesses, labor from households and taxes both to provide services such as military, education and infrastructure improvements (Colander, 2010). On a larger scale, the country’s economy is interconnected with other countries through import and export of goods.
The simple process of buying groceries weaves an intricate web through the entire economy. Everyone needs to eat and to get a food product onto your dinner table. It must travel the intricate web of the economy. Let us look at how a head of lettuce finds its way into your hamburger. First, there needs to be a demand for lettuce. With the demand, a household farmer decides to grow lettuce. In order for the farmer to sell lettuce back to the general population, he must

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