Gross Domestic Product:
Gross Domestic Product, usually abbreviated as ‘GDP’ is the total amount of goods and services produced in an economy during a given period of time. GDP is also one of the popular economic data source, used for the purpose of future forecasting of economic trends in a nation. Apart from future forecasting, GDP is also used to compare growth between two or more nations. For Instance, if during 2013, GDP of Canada is 5.6% and of United States is 6%, this indicates that the US economy has higher growth.
Real Gross Domestic Product:
Real GDP is a macro-economic measurement indicator, which accounts for total value of all the goods and services produced in an economy adjusted for the price changes. In other words, Real GDP is the inflation-adjusted measure that reflects the value of goods and services produced in an economy. Real GDP is considered to be a better economic indicator than Nominal GDP. Economic researchers used Real GDP of a nation to estimate the standard of living of the people within a nation so as to conclude if the product or services produced are successful or not.
Nominal Gross Domestic Product:
When value of all the goods and services produced are accounted at prevailing market price, then GDP is said to be Nominal GDP. In simple words, this kind of GDP measurement is not adjusted for inflation. Economic researchers and users of Macro-Economic data, avoid use of Nominal GDP as it is said to be misleading because inflation is not accounted for in the GDP calculation.
Unemployment Rate:
Macro-Economic multiple which refers to the percentage of individuals in the total workforce who are unemployed and are looking for a job/paid productive activity. Unemployment rate is the most economic indicator of a nation and is closely watched by the economic researchers as high rate of unemployment can even erode a nation’s economy. Similarly, low and controlled unemployment rate indicates growth and strength in the economy.
Inflation Rate:
The rate at which a persistent rise in price of goods and services in an economy is recorded is known as Inflation Rate. Inflation is accounted using Consumer Price Index that expresses the current prices of a basket of goods and services in terms of prices during the same period in the previous so as to indicate the inflation rate in the economy. Inflation if left uncontrolled can even destroy the economic functioning and can also force the nation to adopt the foreign currency.
Interest Rates:
Interest Rate refers to amount charged from the borrower on the amount borrowed. In economic glossary, Interest Rate carrier’s significant importance in the movement and flow of resources in the economy as it decides the flow of investment, and purchasing and consumption decision in the economy. Interest Rate is altered by central monetary authority considering the current state of an economy. For Instance, if an economy is in the grip of high inflation rates, then the central monetary authority in order to stimulate the economic condition of the country will increase the interest rates so as to reduce the level of investment and to reduce the level of consumption of goods and services.
Part 2:
Before starting discussion on the given points, please note that every economic activity has multiple effects on different sector of the nation as Household, Government and Businesses.
Purchase of Groceries:
Purchase of Groceries is a consumption activity and affects all the three groups, i.e., Household, Government and Businesses. For Instance, businesses have to decide what to produce but the quantity i.e., how much to produce is dependant is on the demand created by the Household. In other words, if a business house is producing more of a good than what is being demanded or which is not being purchased by the households, ultimately it will have to sell the good at minimum price. Similarly, if household are favoring purchase of the good, the business has can earn premium from it.
This whole process also affects the government as higher the price of a good, more tax will be earned by the Government and vice-versa.
Massive-Layoff of Employees:
This activity affects all the three section of the society by reducing the ability to consumer and production of the good. If a business experience massive layoff of employees as it is not able to produce a favorable product for the market, this will ultimately reduce income levels of both the businesses and lay off employees which will be seen as reduced purchasing power and production levels.
As a result, low consumption and low production will turn into low tax revenue for the government.
Decrease in Taxes:
This measure is adopted by the Government at the times of Deflation in the economy, where the households do not have enough purchasing power left to support economic stimulus. Thus, with reduction in tax rates, households experience improved purchasing power which in turn results into increased consumer demand for businesses.
Works Cited
Investopedia. (n.d.). Interest Rates. Retrieved March 16, 2014, from Investopedia: http://www.investopedia.com/terms/u/unemploymentrate.asp
Parkin, M. (2011). US Inflation, Unemployment. In C. Institute, Economics (pp. 280-291). Boston: Custom.
