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Consumer Price Index Essay

Real gross domestic product is nation’s whole outputs of goods and services formed, accustomed for the price change from the base year. For example presume in a year an economy produce 5 bags 6 at $ 10 each i. e. 50$ . In year 2, it produced same 5 bags but the price rose to 20$ i. e. 100$ . Now it has been assumed first year is base year and used to calculate the real GDP. In year 1 the so-called GDP was 50$ and the real GDP was also 50$ but in year 2 nominal GDP was 100$ but real GDP was 50$.

This is because in constant (year 1) only 50$ in bags were produced thus if price changes are eliminated the goods produced are same. It is sometimes also acknowledged as constant price GDP or inflation corrected GDP. Unemployment occurs while an individual is capable, prepared and eager to work but is at present devoid of work. Unemployment means a condition in an economy where resources are idle and are not being fully utilized due to which labor being the factor of production is idle . The unemployment is usually measured using unemployment rate i.e.

Citizens keenly looking

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for work, out of the total number of employable people (McConnell, 2008). Different types of unemployment are 1. Frictional unemployment 2. Cyclical unemployment 3. Seasonal unemployment 4. Structural unemployment. Inflation means general mount in the level of price of the property use in a market for a period of time. Inflation relates purchasing power of an economy. It is usually described as an overflow of money and credit. The root cause of inflation is the expansion of money supply beyond the capacity of an economy.

The trend of prices levels the course of inflation or deflation. Inflation arte is used to calculate the level of inflation arising in economy i. e. proportionate increase of price of supplies and services is frequently on annual basis. There are 4 types of inflation: 1. Moderate inflation 2. Running inflation 3. Galloping inflation 4. Hyper inflation. Interest rates are the most powerful instrument of an economy but at the same time is rounded and unsure one. If in a country rate of interest is altered every households and firm is probable to be effected.

Fluctuation in the rate of interest will tent to reduce the comprehensive demand in the economy this is because savings will be encouraged and borrowings will be depressed and the expenditure of households who are borrowers will be reduced. The descending stress on the spending is likely to reduce the inflationary force but it may have and unfavorable effect on the balance of payments. Higher interest rate will affect the money to flow in the economy which in return will boost the worth of money and will cause export prices to go up and import prices to drop.

Increase interest rate may affect the poor more severely compare to rich as they are more likely to be borrowers. If an economy is pushing itself towards recession, lower interest rates may not persuade the household sector and firm to pay out in the marketplace if individual are anxious about their jobs. Wal-Mart has tremendous economic benefits for the patrons by providing them more and more choices at lower prices, especially in community that had only local retail monopoly aforementioned to the chain’s arrival . It has been previously witnessed that Wal-Mart has contribute to the lower consumer prices.

An increasing turn down of in the foodstuff price has been seen and decline in the commodities prices at 105% and an in general decline of 3. 1% in consumer prices calculated by Consumer Price Index (Michael, 2007). The saving generated from the Wal-Mart’s prevailing capital investment in sharing, lower import prices and greater competence in the whole supply chain.


Colander, D. (2007). Macroeconomics. 7th Edition. McGraw-Hill/Irwin. McConnell, C. & Brue, S. & Flynn, S. (2008, ) Macroeconomics. 17th Edition. McGraw-Hill/Irwin. Michael, J. H. (2007) The Local Economic Impact of Wal-Mart. Cambria Press.

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