Macroeconomics Basics

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Macroeconomic Basics
Question No. 1:
Two primary methods can be used to evaluate living standards; these are national Gross Domestic Product (GDP) and the per capita GDP. The national GPD refers to the value of goods and services produced within a particular country in a specified period. National GDP is the primary measuring tool of a nation’s output (Coppock and Dirk 178). Per capita GDP refers to GPD per person and is computed by dividing a country’s GDP with its population. Although national GDP is essential in providing information on various economic aspects, it is not the best in the assessment of living standards. Countries with a high population such as China have a greater national GDP when compared to other less populous countries such as Japan. Despite having a higher national GDP, in 2013, the per capita GDP of China was at $6,800 while that of Japan was over $38,000 per person (Coppock and Dirk 180). The living standards are therefore better in Japan due to the higher per capita GDP that provides the Japanese people with a higher purchasing power making it possible to purchase higher quality services such as quality education and healthcare.
Question No. 2
Unemployment can be grouped into three main categories. The first group is structured unemployment which is caused by people failing to adapt to changes. Over the years, the economy has undergone progressive transformation leading to the development of a modern economy and new jobs that require entirely different skills.

Some posts have become obsolete which has led to some level of increased unemployment even if it is for some limited amount of time. Another type of unemployment is the fictional unemployment; this is a natural form of unemployment just like structured unemployment; it is caused by delays in matching the employees with the available jobs in situations where there exists both the employment slots and qualified people to fill them (Coppock and Dirk 218). Employers are always looking for the most suitable workers while the workers are continually searching for the best jobs in regards to working conditions and the rewarding systems put in place; this makes the job seeking, and worker hiring processes take longer. The last type of unemployment is cynical unemployment; economic downturns or recession cause this sort of unemployment. In a shaky economy, people are ready to work and have the required qualifications. However, the number of available employees exceeds the number of available jobs to a great extent; this leaves the majority of people unemployed.
Question No. 3:
Inflation is defined as an overall rise in the prices of services and commodities. The GDP deflator and the Consumer Price Index (CPI) are both used to measure the rate of inflation. The CPI measures inflation through assessing the consumption patterns of the average consumer. The aspects considered include expenditure on items such as education, medical care, transportation, and clothing. The information is then used to generate a typical consumer’s cost of living (Coppock and Dirk 245). The GDP deflator is a more efficient tool for measuring inflation; it is different from the CPI as it includes all the prices of the services and commodities that make up the GDP. The GDP deflator takes into account a wide variety of cost considerations in the calculation of inflation. For example, when the consumer buys milk from a retail center, GDP deflator takes into account other costs such cost of farm equipment and labor costs before arriving at the final inflation rate.
Works Cited
Coppock, Lee, and Dirk Mateer. Principles of Microeconomics. WW Norton, (2017): 174-274.