Question

pinay, dinini 1. Contrast the economic growth and business cycles. 2. What are the three primary measures used in macroeconomics to assess the performance of an economy? Real GDP: Provides an overall indicator of output or production in the economy Unemployment: Measures the degree to which labor resources are being fully used Inflation: The increase of prices in the economy 3. The three major indicators of the health and development of an economy include: real GDP, unemployment, and inflation. All other things equal, would an economy prefer these numbers to be increasing or decreasing? Why? 4. Describe the difference between real GDP and nominal GDP. Which concept is more useful for measuring change in the economy over time? Why? Nominal GDP is the current price and real GDP is what corrects the price change. Prices are held constant when calculating real GDP so the only measured changes will be the output. Real GDP is more useful in measuring the change in the economy over time because nominal values are affected by price changes and are misleading. ????????? 5. What is the difference between economic investment and financial investment? Give an example for each type
1,3 and the second part of 4 i dont understand

Answer 1

Answer 1. Economic growth reflects long term supply side factors like technological advancements, capital investment, infrastructure etc. On the other hand, Business cycle fluctuates around a given trend and mainly relfects the short run demand side factors. This is known as dichotomy of business cycle and economic growth.

3. Real GDP would be preferred to be increasing as it means higher growth in the economy.

Unemployment is preferred to be decreasing, when real GDP rises, output rises which requires more labor, so unemployment decreases.

Rising and moderated inflation is a sign for economic growth, but too high inflation deters economic growth. At the same time, low inflation means very slow economic growth.

Answer 4. b. Real GDP is more useful, as it takes nominal GDP and adjust for inflation and doesn't reflect false increase or decrease in GDP due to price level changes. When inflation is removed, the change in output can be compared. Hence, Real GDP is a more accurate measure when comparing GDP across many years.