Intermediate Goods, as the Name

Intermediate goods, as the name implies, are goods available for resale; they are used in the production of other goods. Final goods, on the other hand, are those goods presented to the ultimate consumers. An example of intermediate goods is automobile parts. Automobiles, like the ones found in car dealerships, are considered final goods. Regarding GDP, it is final (and not intermediate) goods that are calculated.

The four components economists use to measure GDP in terms of the expenditure approach are as follows: consumption, investment, government purchases, and net exports. Consumption consists of the total expenditure in durable and non-durable goods and services. Investment is the amount of resources devoted to the production of new capital. Government purchases are those goods and services acquired by government. Net exports are the differences between exports and imports.

GDP, the total value of goods and services produced by a country in a specified period of time, does not accurately reflect the distribution of wealth in that nation. As it is a cumulative figure, GDP fails to list to whom the wealth is allocated. For example, country X has a GDP of $6 billion; this is an indication of the overall wealth of the nation. However, what is unclear is amongst whom this $6 billion is distributed. It is likely that some segments of the population possess very little of this GDP.

6. Some externalities that are not included in GDP include: war, natural disasters, ecological damage, depletion of natural resources, and leisure. Consider ecological damage; it is not factored into a country's GDP although it certainly negatively affects the welfare of its citizenry. Additionally, the amount of leisure time available to a nation's residents is not calculated in its GDP even though it may better reflect the wealth of its constituents.

7. Productivity is defined as the quantity of output generated by a unit of input. Said differently, productivity measures the amount produced by a worker, machine, factory, etc. Obviously, there is a general and sustained interest in increasing productivity; this means that organizations and individuals want more goods and services created using stable amounts of effort. Progress in technology has greatly advanced this objective.

8. Nominal interest rate is calculated by adding anticipated rates of inflation to the real rate of interest. As such, the amount repaid to the lender does not accurately reflect adjustments in its purchasing power. To compensate, nominal interest rates float; they change with inflation rates. Real interest rates, on the other hand, do factor in inflation rates. With this type of return rate, the borrower experiences an increase in purchasing power.

9. Cyclical unemployment arises out of a nation's reduction in productivity; it occurs when an economy produces less. Logically, this type of unemployment explodes during recessions and falls during times of recovery and/or prosperity; it follows the business cycle. Structural unemployment refers to a decreased demand of workers; it may be due to increased automation, outdated skills, or geographical incongruencies. Frictional unemployment occurs when workers are in between jobs; it is by nature temporary unemployment and reflects ordinary transitions in the labor market.

11. There exists a close relationship between technological change and the growth rate of productivity. It has been consistently demonstrated that as technology improves, labor productivity concurrently increases. In fact, growth in productivity is intimately tied to technological progress. In other words, superior technology encourages highly efficient methods of production. While an economy may easily maintain its level of productivity without technological progress, this cannot be said for productivity growth.