Define and explain how national income (GDP and National Income) and rates of unemployment and inflation are measured

The gross domestic product measures the total goods and services bought by buyers encompassing all private expenditures, government spendings, investments, and exports excluding imports that take place within a designated country. It is computed based on the following equation:

Y = C + I + G + (EX - IM),

where

• Y: represents GDP,
• C: represents national consumption
• I: represents national investment
• G: represents government spending
• EX: represents export
• IM: represents import

On the other hand, unemployment is the rate of people who want a job but are unemployed. The unemployment rate is calculated based on the total number of unemployed labor force divided by the total number of individuals in the labor force. Mathematically, the unemployment rate is equivalent to

• Unemployment Rate = (Total Unemployed / Total Labor Workforce)

Meanwhile, inflation is a sustained increase in the general price level. It reduces the purchasing power of money. For example, Mr. A buys a particular product for $1 in the year 1965. Now, for the year 2020, he buys the same product at $10. As you can see, Mr. A bought the same product but at different prices, that is how inflation works. To compute the inflation rate, we will be using the CPI or the Consumer Price Index.

• Inflation Rate = (Later CPI - Earlier CPI) / Earlier CPI)) X 100

Simply multiply the inflation rate to the earlier CPI to get the amount of inflation.