Answer to Question #286467 in Macroeconomics for Aster

Question

Explain the following terms and give example for each when necessary

1)               GDP AND GNP

2)               Approaches of measuring GDP

3)               Unemployment and its type

4)               Inflation and its type

5)               Fiscal policy and tools

6)               Monetary policy and tools

7)               Objectives of Macroeconomic policies

Answer 1

$Solution$

1)The value of goods and services generated within a country's borders, by citizens and non-citizens equally, is measured by GDP.

The value of goods and services produced by a country's population, both locally and internationally, is measured by GNP.

2) value added approach or production approach-measures economic activity by adding the market values of goods and services produced,excluding any goods and services used up in intermediate stages of  production. Value added concept is used that is output minus all inputs used within a given specific period.

Expenditure approach- that is how much is spent on stuff in an economy in a given period.

Income approach - that is how much is earned in profits by firms and wages and salaries in individuals over a given period usually one year.

3) unemployment is when an individuals is actively searching for employment but is unable to find work.

There are two broader categories of unemployment that is voluntary and involuntarily

The three major categories of unemployment

can be classified as frictional, cyclical, structural, or institutional.

Others are:technological unemployment, disguised unemployment, seasonal unemployment.

4) inflation is sustained increase in prices of goods and services or fall of monetary value. This in turn reduces purchasing power.

Types of inflation are : demand-pull, cost -push and built-in inflation.

5)Fiscal policy is the use of government spending and taxation to influence the economy.

The tools used are taxes , government spending ,transfer of payments to influence demand aggregate.

6)The control of the amount of money accessible in an economy, as well as the routes through which new money is supplied, is referred to as monetary policy.

the tools of monetary policy tools are the reserve requirement , open open market operations ,the discount rate and interest on reserve.

7)To maximize national income by fostering economic growth in order to improve the utility and standard of living of economy participants.