How is inflation, the output gap and monetary policy related 2. GDP definition includes Market value, final goods and services , production within acountry and a given period of time. Justify importance of using market value of final goods and services to cal GDP and explain why each component of GDP is important

Answer:

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Step-by-step explanation:Hi,

Here's a little of Macroeconomics. Especially under Keynes's viewpoint and Economics.

1) These are intertwined concepts: The output gap, Monetary Policy, and Inflation.

Output Gap: This fits as a parameter that shows us if inflation or deflation. Usually, we notice it in case of inflation.

If the demand rises rapidly on a series of products and services an output gap occurs. And subsequently, the prices fly high due to the sudden pressures in the whole chain of supply, causing inflation.

Then the Government to face the inflation makes use of the Monetary policy to slow the inflation rate down is making use of interest rates. By doing that, the Fed or any other Central Bank makes the loans more expensive and helps to decrease the inflation rate.

2.

The Market Value on GDP is not steady, so it is not possible to talk about Gross Domestic Product and exclude how much does it value on the International Market. Let's say a country that almost only produces petrol its GDP is also directly linked to the International value of Petroleum.

Similarly, final goods and services also get into account. Since our economy services are also as valuable as a commodity, or a product, for instance, the banking services on Luxembourg are part of their GDP.

Moreover, a production within a country works like that if a Spanish man works temporarily in Belgium, the value of his work is credited to Spain's GDP.

And finally, since GDP is measured according to period then there's a need to get into account which period are we considering?