What is Macroeconomics Essay Example | Topics and Well Written Essays - 1750 words

What is Macroeconomics - Essay Example What is Macroeconomics? Macroeconomics deals with the aggregate indicators like prices, unemployment rates and GDP in order to know how the entire economy works. Macroeconomists build models that clarify the connection between factors like international finance, national income, consumption, output, savings, inflation, unemployment, international trade and investment. In contrary, micro economics is basically fixated on individual agents’ action like consumers and firms and in what way do their behavior affect quantity and prices in particular markets. As macroeconomics is a wide study field, two fields of researches which are symbolic of the subject. The move to understand the consequences and causes of short run variations in a business cycle and the move to know the determinants of economic growth are some of its main objectives. Macroeconomics model and its forecast are used by large corporations and government to assist in evaluation and development of business strategy and economic policy (Dwiv edi, pp.7) Macroeconomics concepts Macroeconomics comprises of variables and concepts though there are 3 core issues for macroeconomic research. Macroeconomic theory always relates inflation, unemployment and output. External to macroeconomics, the topics are extensively vital to economic agents inclusive of producers, consumers and workers. Output and income The general economic activity for the economy is briefed by an output aggregate measure. As the manufacture or services and goods output generates income. Each entire output measure relates to the measure of aggregate income. The states of America today employ the concept of aggregate output known as GDP (gross domestic product). The gross domestic product is the measure of services and goods currently produced at market prices value. An individual should note that there are many GDP measure features. To start with, only presently produced goods are encompassed. This means that when one purchases an old Tudor house aged 150 yea rs, it does not add up to the GDP. What adds to the GDP is the service that the estate agent renders in the house purchasing process. Secondly, end products are counted. For avoidance of count, intermediate goods do not add to the GDP. For instance, steel that is used in automobile manufacture is valued as a whole. Lastly, all services and goods encompassed in GDP are assessed at market prices. Hence the prices show the prices paid by consumers at retail level inclusive of indirect taxes like sales taxes. GNP (gross national product) is a similar measure to GDP. Up to late, the government has employed GNP as the core measure of economic activity of the nation. Changes in trends always places more effect on income or output instead of prices (Blaug, pp. 108) There is a slight difference between GDP and GNP. The GDP is exclusive of income that the U.S resident and companies earn abroad. Many other income and output measures are consequent from GNP. They are inclusive of NNP (net natio nal product), which extracts an allowance for tear and wear on equipment and plant from GNP called depreciation. Though these measures change down and up in a general same fashion, it is disposable income which is closely tied to customers demand for services and goods. It is the most outstanding aggregate demand component and entire demand for services and goods in the economy from sources. It should be noticed that the entire output or income measures deliberated above are always mentioned in real terms and nominal terms. The real terms are attuned for inflation and hence widely used as they are not distortion subject introduced by price changes. Unemployment The unemployment number in a state is measure using the rate of unemployment, workers percentage with no jobs in the labor