Fundamentals of Macroeconomics: Option One
Describing some terminology of economics would help us to understand in a better way the world of economics. Defining the Gross Domestic Product (GDP), unemployment rate, inflation rate, and interest rate would result beneficial for us. Since we would know how those factors affect the economy in our nation and other countries.
Gross Domestic Product is the total value of all the products manufactured and goods within a country in a period of time for example a year. GDP is dividing into four categories depending on who buys the output. Those are called expenditure categories; consumption, investment, government spending, and net exports. A simple example of GDP could be if we buy a DVD, we are contributing to consumption expenditures.
Unemployment rate is the percent of people who are not currently working but they are able to work or currently seeking for a job. We can obtain the unemployment rate by dividing the number of unemployed people by the number of people who are working and then multiplied by 100. For example, in January 2008 U.S. unemployment rates were 4.4% for adult men, 4.2% for adult women, 4.4% for Caucasians, 6.3% for Hispanics or Latinos (all races), 9.2% for African Americans, 3.2% for Asian Americans, and 18.0% for teenagers (Unemployment, 2013).
Inflation rate the prices of items and services is rising while purchasing power in decline. Inflation results in higher prices for the same amount goods and services one could have bought the year before for a lower price. For example, if the inflation rate is 2% annually, then theoretically a $1 pack of gum will cost $1.02 in a year. After inflation, your dollar can't buy the same goods it could beforehand (What is Inflation?, 2013).
Interest rate is a percentage of the principal, which is the total amount of a loan, given by a lender for the use of an