Macroeconomics is the study of large-scale economic issues, such as inflation, GDP (GDP), and unemployment. It helps form the basis of a large part of government economic policy.

Frequently Asked Questions
  • How do you calculate the GDP of a country?

    There are three main ways to calculate GDP, the production, expenditure, and income methods. The production method adds up consumer spending (C), private investment (I), government spending (G), then adds net exports, which is exports (X) minus imports (M). As an equation it is usually expressed as GDP=C+G+I+(X-M).

  • What are the four factors of production?

    The four factors of production are land, labor, capital and entrepreneurship.

  • What is the difference between nominal GDP and real GDP?

    Nominal gross domestic product (GDP) is the unadjusted GDP number. Whenever an economic figure is adjusted for inflation it is referred to as a real figure, so real GDP is nominal GDP adjusted for inflation.

  • What Is Purchasing Power Parity (PPP)?

    PPP is a way of measuring the price of goods and services between countries while adjusting for the relative exchange rates of their currencies. It is an attempt to better understand what people can buy and produce in a country without the differences in relative value of each country’s currency distorting it.

Key Terms

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