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Fundamentals of Macroeconomics

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Gross Domestic Product (GDP) is the monetary values of the officially recognized finished goods and services that are produced within a country in a specific period. It is usually calculated annually. It comprises all public and private consumption, investments, government expenditure and the net exports that occur within a country. GDP is normally used to measure economic growth and standard of living of a country.

Real GDP is an inflation-adjusted measure, which indicates the value of all finished goods and services that are produced in a country in a specific year, articulated in the base-year prices. It is often referred as inflation-corrected GDP.

Nominal GDP is the market value of all the finished goods and services produced in a country. It is a GDP figure, which has not been attuned for inflation. Nominal GDP can be deceptive when inflation is not taken into account in the GDP figure since the figure will emerge higher than the actual figure (Baumol & Blinder, 2011).

Unemployment rate is the percentage of total labor force that is not employed but actively looking for employment and ready to work. Unemployment rate is among the closely monitored statistics because an increasing rate is considered as a sign of declining economy.

Inflation rate is the percentage increase in the prices of goods and services articulated on yearly basis. It is a measure of how quick a currency drops its value.

Interest rate is the percentage of the principal charged by a lender to the person who borrowed for the use of money. Interest rates are normally expressed as yearly percentage of the principal. It is generally a leasing or rental charge to the borrower for using an asset.

Purchasing groceries has several effects on the economy. When individuals buy more groceries, more taxes goes to the government, and if people do not buy more groceries, less tax goes to the government. For the household buying groceries indicates how well the family eat. If families make good money, they eat more expensive meals, which contribute to more money spent at the store. The more the purchasing at the store the more the money a business makes. The number of individuals purchasing food at the grocery store determines the success of the business (Baumol & Blinder, 2011).

The impact of massive layoffs of employees is experienced on every ends such as government, household, and business. Households are the majorly affected by layoff because it alters the whole dynamic of the house as some families are going from double to single income or from single to none. Businesses progress will drop as a result of massive layoff since people who normally shop will not have money to buy goods that are not essential. On the other hand, the government will also go through a declining economy because of the reduction in total tax.

Decrease in taxes also has effect on the government, business and household. If tax decreases, the revenue of the government will decrease as well. This means that the economic growth of a country will grow. Research indicates that an economy of a country grows when taxes are reduced. It improves the economy by offering the people more expenditure power and higher confidence. This leads them to spend more income which leads to more jobs, more investment and higher GDP (Andy, 2010)

When the revenue of a government decrease, there will be no fund to finance government employees, hence leads to massive layoff. Decreasing taxes could positively affect the household because employees, who are not employed by the government, can safe more money to be used by the household. When tax is decreased, business will flourish because many people will afford to buy products at lower prices.

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