Project Paper Macroeconomics

1154 Words Jan 20th, 2011 5 Pages
Project Paper
1. What is the gross domestic product?
Gross Domestic Product, or GDP, is the total market value of final goods and services produced within an economy in a given year. It is the most common measure of an economy’s total output.
2. When prices change, how do we measure real income?
When prices change we measure real income with
3. What is unemployment? Why can’t it be driven down to zero?
Unemployment is when you don’t have a job. Unemployed people are those who don’t have a job but are actively looking for work. Unemployment cannot be driven down to zero because the lower the unemployment rate is, the harder it will be for businesses to hire new employees. The harder it is to find qualified employees, the more
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There is an increased demand for domestic and foreign products and this promotes domestic investment as foreign and domestic businesses seek to benefit from on the growth in demand. As the rate of growth increases foreign credit sources have greater incentives to invest in a growing nation's capital. The greater net inflows from abroad, the greater the trade deficit is. However, the excessive borrowing may artificially inflate GDP.
8. What factors determine technological progress?
Technological progress is determined by energy, information, new inventions, new ideas and new ways of doing things.
9. How do we define a recession? A recession is when there is a decline in the real gross domestic product for six consecutive months.
10. Why doesn’t the economy always operate a full employment?
An economy doesn’t always operate at full employment because employers have to make changes when there are changes in the economy. When real GDP decreases they may have to fire or lay off workers. When real GDP increases businesses will need to hire more workers.
11. Why do governments cut taxes to increase economic output?
Governments cut taxes to increase in the real income of those whose tax rate has been lowered. Tax cuts may provide individuals and corporations with an incentive for investments which stimulate so much economic activity that even at the lower rate more net tax revenue will be collected.
13. Why does

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