Classical Theory

- The economy runs by itself and you don't have to do anything. It's self correcting and self regulating.

GDP

GDP- The level of output. The sum of everything we have. Without cost of Tools and Resources. The value of all goods and services in the country.

Real GDP

Real GDP- How much the Gross Domestic Product costs within the current year using a previous year's prices as a base line.
Value is relative by year.

Inflation

If Inflation is positive then the Nominal GDP and Nominal GDP growth rate will be less than their Nominal GDP counterparts.
If inflation is negative then the Nominal GDP and Nominal GDP growth rate will be more than their Nominal GDP counterparts.
*Inflation is an increase in the price of a basket of goods and services that is representative of the economy as a whole.

Keynesian Theory of Economics

The government needs to regulate the economy.