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Date Submitted: 08/11/2012 11:24 PM

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Gross Domestic Product (GDP) is the output produced within a country. The calculation of factors such as consumption, investment, government spending and exports and imports gives the GDP of a country. The more output in a given year means the GDP of a country is growing. In the recent years, countries like China and India have better GDP than many other countries because of the modern developments and increase in technological advancements. In macroeconomics, which is the study of the whole country’s economy, measures the output taking into consideration inflation or deflation is known as the real GDP.

Unemployment is a calculation of individuals who are out of work at a given period of time by the total number of people who are working. The unemployment numbers show how many people do not have work and are actively looking to gain employment. Economic growth of a country depends on the numbers especially unemployment within that country. These numbers fluctuate depending on people finding work or not, layoffs, closures and other reasons. Interest rate is the interest charged by lenders to the borrowers of funds. The interest rate is controlled by the Federal Reserve at all times to control the inflation or deflation in an economy. Lately, the Fed has dropped the rates to promote home buying because the people have lost their trust in the housing market. The prices of homes are falling and more people are refraining from buying properties fearing that they will not be able to pay the banks or the return on investment would not be worth buying. The inflation rate is a calculation of the decrease in buying power. The increase in the prices for buying goods and services causes inflation and the rate at which this increase in prices is calculated is called the inflation rate.

The three sectors- households, government and business are inter-connected according to the circular flow diagram. The business produces and sells goods and services to the households and...