Federal Reserve Report - Real Gdp

Federal Reserve report

REAL GDP

Real GDP stand for Real Gross Domestic Product. It is the total value of all final goods and services produced during a given period of time. When people want to determine the growing of or shrinking of the economy. it involves counting the value of the final product that is produced. Example: when the country is producing bread, by the time of counting the output of the bread they will not count the flour that they have used in the production of bread and the final product (bread) because this might be a double counting since the flour they are counting is also in the bread that they are counting it price. In real GDP only final goods to avoid double counting.

In the cycle of business, real GDP define the expansion and recession of economy. A sustained period in which real GDP falling is called recession. For a long period of time when real GDP is rising it is called expansion.

INFLATION

Inflation

Explain the background concepts of:

real GDP.

inflation.

http://www.investopedia.com/university/inflation/inflation1.asp 

Inflation is the rate at which the general level of price for goods and services is rising and, consequently the purchasing power of currency is falling. It is a sustained increase in the general price of goods and services in a given country. The prices rise but alternatively the value of money falls. An example when in the country there is a rise of inflation the flour which was used to buy $0.05, it may rise and cost $1.02. http://www.yourarticlelibrary.com/macro-economics/inflation-macro-economics/main-causes-of-inflation-derived-by-economists/32883/  They are three types of inflation according to their causes. Cost push inflation occurs when the price level increases in the cost of production. When they cost of production is becoming expensive the prices that will be set by producers will also be higher for them to maintain their profit margin. Demand pull inflation occurs when the price level is being pulled up by the excess demand. Higher consumption of products in the country (aggregate demand) can lead to inflation. Monetary inflation occurs when there is excess demand that is caused an excessive growth of money supply, this may be the results of producing much money in the country.