Gross Domestic Product Terms Definitions Essay

695 words - 3 pages

After reading the materials and viewing several web sites, Gross Domestic Product can be defined as the sum value of all produced goods and services at current prices yet it has 3 different distinctions. GDP is also widely used to measure productivity of an economy.1. GDP expresses the worth of output for a country in local currency.2. GDP figures all final goods and services produced within a country to make sure the final monetary value of what is created is represented in the GDP.3. GDP is calculated for a specific period, usually a year or a quarter out of a year.Real GDP is the sum value of all produced goods and services at constant prices.Unemployment rate can be defined basically as the number of unemployed people divided by the labor force. The labor force is considered the number of employed persons plus the number of unemployed persons. The computations of employed persons (Current Population Survey,) unemployed persons, labor force (Current Population Survey,) and the current unemployment rates make up the rate.Inflation rate is basically a measure of inflation or the rate of increase of a price index. It is the percentage rate of change in a price level over a period of time and is commonly expressed in annualized terms. It is used to calculate the real interest rate, as well as real increases in wages.An interest rate is the price someone has to pay for the use of money they do not own. Companies and individuals who borrow money for credit or loans have to pay back what was originally borrowed plus and added fee that is usually agreed upon and computed at a rate that will be paid monthly in exchange for the credit.The circular flow diagram is basically a model that describes the reciprocating circle of income between producers and consumers. It shows the interaction between household, business, and government sectors. The household sector consists of people, any and everyone seeking out to satisfy his or her wants and needs. Households basically have two functions in our economy. They are to sell labor, land and capital to businesses in order to make an income and to...

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