Term Definition Paper

Essay by arualUniversity, Bachelor'sA+, May 2010

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Term Definition Paper


ECO/372: Macroeconomics

March 8, 2010



Term Definition Paper

Whether a person monitors the financial situation of the United States or how their personal finances are fluctuating, economics is all around. Economics is "the study of how human beings coordinate their wants and desires, given the decision-making mechanisms, social customs, and political realities of the society" (Colander, 2008, p. 4). Economics deals with the coordination of how the three central problems, (a)" what, and how much, to produce," (b) "how to produce it," and (c) "for whom to produce it" (Colander, 22008, p. 5) an economy faces are solved. To better understand how the economy works requires knowledge of economic terms and how the interaction of households, government, and business creates economic conditions that affect one another.

Term Definitions

Gross Domestic Product (GDP)

Gross domestic product is "the total market value of all final goods and services produced in an economy in a one-year period" (Colander, 2008, p.

533). GDP is divided into four expenditure categories: (a) consumption, (b) investment, (c) government spending, and (d) net exports. GDP is measured in quarters, reflects the previous quarter and is released at 8:30 a.m. EST on the last day of each quarter (InvestorGuide, 2010, para. 2). In the United States, the economy grows at approximately 2.5 to 3% each year.

Real GDP

Real GDP is the "inflation-adjusted measure that reflects the value of all goods and services produced in a given year, expressed in base-year prices" (Investopedia, 2010, para. 1). Economists measure the growth in the United States economy by the changes in real GDP. Real GDP is calculated by dividing the nominal GDP by the GDP deflator, then multiplying by 100.

Unemployment Rate...