Gross Domestic Product

There is significant difference between calculating the GDP (gross domestic product) and the GNP (gross national product) of a nation. The gross domestic product is the total value of goods and services that is produced by a nation, within a calendar year, inside the borders of the country. Gross domestic product does not take the ownership interests into account when calculating the figure to GDP. All products and services that are created and transacted within the economy of the country are considered to be a portion of the GDP. By contrast the gross national product is calculated by all of the national output of goods and services by all individuals and business organizations that are based in a particular country.

Assume, at the beginning,(24 hours in the day-0 hours of leisure), depends on the increasing of leisure hours, the real wage will be decrease. Then both of N and Output will be decrease.

In the classical model, the factor that determine output and employment are those factors that determine the positions of the labor supply and demand curves and the position of the aggregate production function. Aggregate demand determines the level of output and employment in the economy.

The quantity of money did not affect the variables in the system: output, employment, and the interest rate. Factors determining the interest rate are real investment demand, real saving, and the real value by government deficit. And the economy would always achieve full employment through forces of supply and demand. The full employment level of employment resulted in a fixed aggregate output/income. The price level was determined by the supply of money in the economy. Since, the output level was fixed; a 10 percent increase in money supply would lead to a 10 percent increase in the price level.

An increase in the interest rate will cause aggregate demand to decline. Interest costs are part of the cost of borrowing and as they rise, both firms and households will cut...