Macroeconomics considers the performance of the economy as a whole. It includes economic growth, inflation, unemployment, and international economics (including European issues).
The sort of newspaper headlines that you might see concerning macroeconomic issues include:
"Bank of England raises interest rates"
"Unemployment set to rise again this month"
"Decrease in global oil prices set to continue"
"Russia signs new trade agreement with the United States"
"Inflation rate stays below 2.5%"
This is a term used to mean the value of flow of output of goods and services produced within the economy over a period of time (usually a year, in which case we call it the Annual National Income). In equations, it is usually represented by the letter Y.
Measuring the level and rate of growth of national income is important to economists when they are considering:
- the rate of economic growth and where the economy is in the business cycle,
- changes to overall living standards of the population, and
- the distribution of national income (i.e. measuring inequalities in income between areas of the country or social classes)
To measure how much output, spending and income has been generated we use the national accounts. British National Accounts aim to quantify three things:
- The total value of goods and services produced in the U.K.,
- the total amount of expenditure taking place in the economy and
- the total amount of income generated through production of goods and services.
Information on the economy is published each month (for example, monthly unemployment and inflation statistics) or each quarter (for example, consumer and investment spending).
Gross Domestic Product (G.D.P.)
(Under new definitions introduced in 1998, G.D.P. is also known as Gross Value Added.)
This is a measure of the value of output produced within the domestic boundaries of the U.K. itself. It includes the output of the many foreign owned firms that are located in the U.K., and excludes output of U.K. owned firms abroad.
There are three ways of calculating the value of G.D.P., all of which should total to the same amount. This is because National Output, National Expenditure and National Income are all defined to be the same thing.