Prepare a 700 word paper in which you define the following terms:
a. Gross Domestic Product (GDP)
b. Real GDP
c. Unemployment rate
d. Inflation rate
e. Interest rate
In your paper, explain how the circular flow diagram illustrates the interaction of households, government, and business. Also, describe how current economic conditions are effecting your organization or one which you are familiar. Identify the most important economic indicator affecting your organization and explain why.
The following solution provides an overview to several key macroeconomic concepts. First, is an overview of economic output as measured by GDP and the process by which Nominal GDP is adjusted to Real GDP. Next, is a discussion of the labor force and how we define unemployment. Then the inflation rate and interest rates are discussed. The overview continues with a discussion of the circular flow model and concludes with a discussion of recent economic conditions and how fiscal and monetary policies have been implemented to fine tune the sluggish economy. This solution is 633 words.