Macroeconomics

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

Explore Macroeconomics

How to Calculate GDP With the Expenditure Approach
Calculating GDP With the Income Approach
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Aggregate Supply Explained: What It Is, How It Works
Bretton Woods Agreement and the Institutions It Created Explained
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What Is Contractionary Policy? Definition, Purpose, and Examples
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Cross Price Elasticity: Definition, Formula for Calculation, and Example
What Is Economic Growth and How Is It Measured?
Gross National Product (GNP)
Gross National Product (GNP) Defined With Example
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Marginal Propensity to Consume (MPC) in Economics, With Formula
Money Supply Definition: Types and How It Affects the Economy
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What Is the Multiplier Effect? Formula and Example
The Phillips Curve Economic Theory Explained
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Producer Price Index (PPI): What It Is and How It's Calculated
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Price Level: What It Means in Economics and Investing
Recessionary Gap
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Velocity of Money: Definition, Formula, and Examples
Continuing Claims Definition
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What Is the Dependency Ratio, and How Do You Calculate It?
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IS-LM Model: What It Is, IS & LM Curves, Characteristics, Limitations
What Is the North American Free Trade Agreement (NAFTA)?
Per Capita GDP Defined: Applications and Highest Per Country
What is Regression? Definition, Calculation, and Example
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What Is Purchasing Power Parity (PPP), and How Is It Calculated?
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Exchange Rate Risk: Economic Exposure
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Economic Indicators That Help Predict Market Trends
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Introduction to the International Fisher Effect
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Understanding the Basel III International Regulations
Strong Dollar: Advantages and Disadvantages
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What Impact Does Inflation Have on the Dollar Value Today?
Explaining the World Through Macroeconomic Analysis
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Basket of Goods: Definition, CPI Calculation, and Example
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Currency Depreciation
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What Is a Developed Economy? Definition, How It Works, HDI Index
Understanding General Equilibrium Theory & Its Alternatives
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What Is an Inflationary Gap in Microeconomics?
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Monetary Aggregates: Definition and Examples
What Is the Neoclassical Growth Theory, and What Does It Predict?
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Rational Expectations Theory Definition and How It Works
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Real Economic Growth Rate (Real GDP Growth Rate): Definition
What Is the Real Effective Exchange Rate (REER) and Its Equation?
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Wholesale Price Index (WPI): What It Is and How It's Calculated
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Paper Money: Definition, History, Use, Need for It, and Examples
Finance vs. Economics: What's the Difference?
Participation Rate vs. Unemployment Rate: What's the Difference?
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Output Gap: What It Means, Pros & Cons of Using It, Example
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Retail Sales: Definition, Measurement, as an Economic Indicator
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Market Dynamics: Definition and Examples
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Quantity Theory of Money: Definition, Formula, and Example
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Gresham's Law: Definition, Who Created It, and Why It Works
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Why Is the Consumer Price Index Controversial?
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Understand the Different Types of Inflation
How Does Money Supply Affect Inflation?
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Inflation vs. Deflation: What's the Difference?
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Contraction: Definition, How It Works, Examples, and Stages