Fundamentals of Macroeconomics

Fundamentals of Macroeconomics

ECO372

November 24, 2013

Fundamentals of Macroeconomics

Human beings coordinate their wants and desires through the decision-making process, social customs, and political forces of society known as economics. Economics contains two parts; one of the parts is macroeconomics. Macroeconomics looks at the economy as a whole and deals with the issues of inflation, unemployment, business cycles, and growth. These issues can affect our lives in ways such as when we buy groceries, are laid off from work, and taxes we pay. The Gross Domestic Product (GDP) is a key to economists when figuring out how the economy is behaving (Colander, 2013).

The economy is measured by the output of the Gross Domestic Product (GDP). GDP is the total market value of all goods and services produced within a one-year period. GDP is a key element in macroeconomics and can be calculated by adding goods, services, government spending, and exports while subtracting the imports. GDP has two different categories, the Real GDP and the Nominal GDP. The Real GDP is the market value of final goods and services produced in an economy, stated in the prices of a given year and also adjusting the Nominal GDP for inflation. The Nominal GDP is the GDP calculated at current prices, which cannot provide data on price increases (Colander, 2013).

Inflation is one of the issues for the economy, but unemployment rates can also affect the economy. Unemployment rates are calculated by taking the total amount of people in the workforce and dividing it by the amount of people who are willing able to work without success, and then to multiply by one hundred. The unemployment rates can be affected by the inflation rates in respect to when inflation rates rise so do unemployment rates. The inflation rate is a sustained increase in the price level of goods and services over a period regardless of productivity. As the price level increases, the consumer consumption will decrease. The...