ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -In broad terms, an increase in real GDP is interpreted as a sign that the economy is doing well. When real GDP is growing strongly, employment is likely to be increasing as companies hire more workers for their factories and people have more money in their pockets.

Detailed explanation-2: -When an economy experiences an increase in the real GDP, the overall disposable income and consumption expenditure increase. This is because the increase in the real GDP increases the amount of money that people earn since the economy can produce more goods and services.

Detailed explanation-3: -As long as growth in real gross domestic product (GDP) exceeds growth in labor productivity, employment will rise. If employment growth is more rapid than labor force growth, the unemployment rate will fall.

Detailed explanation-4: -An increase in GDP will raise the demand for money because people will need more money to make the transactions necessary to purchase the new GDP. In other words, real money demand rises due to the transactions demand effect.

Detailed explanation-5: -During economic expansion, GDP rises, per capita income grows, unemployment declines, and equity markets generally perform well. The peak phase represents the end of an expansionary period after which contraction takes hold.