ECONOMICS

DEFINE THE FOLLOWING TERMS

GROSS DOMESTIC PRODUCT

National income is the monetary value of all the goods and services produced in an economy within a given period of time , national income is measured in three approaches and they include

Income approach

It involves measuring factor incomes that are earned by all the factors of production

Expenditure approach

Involves adding up all the expenditure on the final goods and services produced in an economy

Product approach

It measures the current flow of goods and services in an economy through

br value added

When the national income is obtained it aids us to get the value of gross domestic production where GDP (gross domestic production ) will be obtained from the following

National income gross domestic production - indirect business tax - net foreign income-depreciation

These measurement is encountered with problems which include the statistical problems of accuracy and which products to include example capital gain , inheritance and illegal activities

GDP which stands for gross domestic production , it is a measure of all the goods and services produced in an economy and the value is based on the current prices in the economy

REAL GDP

Real GDP is a measure of the value of all goods and services produced and the value is expressed in reference to a chosen base year

C ) UNEMPLOYMENT RATE

Unemployment rate is a measure of the unemployed in an economy , the rate is based on the level of the number of the unemployed and the entire level of labor force , these rates is calculated by getting the level of unemployed divided by the entire labor force and the result is multiplied by a hundred

D ) INFLATION RATE

The rate of inflation is the measure of price rise from a previous level , inflation is the persistent rise in the level of prices over a long period of time , it is calculated by getting the difference in prices between two periods and dividing by a base period the value is multiplied by a hundred . According to Keynes inflation can be caused by demand pull or cost push

The Phillips curve depicts the relationship between employment and inflation , it states that when an economy nears full employment the greater is the rate of inflation and when the rate of employment is low the less is the inflation ally pressure

Below is the Phillips curve Causes of inflation

Demand pull

Exists when aggregate demand exceeds the aggregate supply and therefore triggering inflation due to an increase in the level of prices

Cost push

Inflation in this case is caused by an increase in the cost of

Production the following diagram depicts the cost push inflation As the cost of production increases the unit cost of goods also increases , this leads to a lower consumer real income and as a result of this trade unions negotiate for higher wage rates , when higher wage rates are achieved the cost of production increases and the process starts all over again , all the above processes lead to inflation

Inflation...