University of Phoenix
ECO/372 – Principles of Macroeconomics
Individual: Fundamentals of Macroeconomics
Instructor: Robert Watson
08 June 2013
Describe the following terms in your word.
• Gross domestic product (GDP)
The total market value of all final goods and services produced in a country in a given
year, equal to total consumer, investment and government spending, plus the value of
exports, minus the value of imports.
• Real GDP
Real variable, such as the real interest rate, is one where the effects of inflation have been
factored in. Real Gross Domestic Product measures the worth of all the goods and
services produced stated in the prices of some base year.
• Nominal GDP
A nominal variable is one where the effects of inflation have not been accounted for. The
Nominal Gross Domestic Product measures the worth of all the goods and services
produced stated in current prices.
• Unemployment rate
Unemployment occurs when a person is laid from an employer or is seeking
employment without success. The unemployment is used to measure the condition of
the economy. This measurement is known as the unemployment rate. It is calculated by
dividing the number of individuals on unemployment by the number of individuals in the
• Inflation rate
It is based on the rising price of good and services and falling purchasing power. This
measurement shows how fast currency loses value. This is calculated by how fast prices
for goods and services rise over time, or how much less one unit of exchange buys
now equated to one unit of exchange at a given time in the past.
• Interest rate
The annualized cost of credit or debt-capital calculated as the percentage ratio of interest
to the principal. Each bank can regulate its own interest rate on loans but, local rates are
about the same from bank to bank. In overall, interest rates rise in times of...
References: Colander, D. C. (2010). Macroeconomics (8th ed.). Boston, MA: McGraw-Hill/Irwin.
Library of Economics and Liberty - http://www.econlib.org/library/sourcesUS.html
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