Option 1: Economic Advisement Paper

Fundamentals of Macroeconomics

Cleveland Ivery

ECO/372 Version 4

11/03/2013

Spyridon Patton

Part 1

Macroeconomics includes a variety of terms relevant to its study. The following terms help identify key factors that influence the U.S. economy. The Gross Domestic Product (GDP) is a measure of a country’s value based on goods produced, services rendered, government spending, and the difference of exports minus imports. The Real GDP is the measure of the output of GDP that is acclimated for inflation or deflation. It is also the amount of the nation’s net exports during a given term say a month or a year, which is expressed in a dollar amount. Economists measure, record, chart, and analyze the trends and fluctuations in the GDP. They use the data to gauge which state of the business cycle the economy is in: contraction, trough, expansion, or peak. This information influences whether businesses will save or invest, hire or fire, and survive or die. The Nominal GDP is a little different in such that the change in price is not accounted for. Unemployment rate refers to the percentage of the American population that is eligible to work but are current jobless. Inflation rate is the percentage change in the increase of the price of goods and services. Interest rate is defined as the annual percentage divided by the principle balance owed monthly on borrowed money. Economists use gross domestic product, unemployment rate, and interest rates as tools to determine economic trends and predict the future changes in the economy. They try to manipulate the frequency, duration, and extremes of those changes; a never-ending effort to minimize the roller coaster effect. Following is a list of loose definitions for those tools. The gross domestic...