A. Aggregation
- Market for "output"
- The composition of various markets is unimportant
- Markets tend to move together
- Study problems such as inflation and unemployment
B. Tools for study
- Aggregate supply curve
- Aggregate demand curve
C. Inflation
- Continuously-rising price level
- Occurs if the aggregate demand curve keeps shifting to the right
- Shift of aggregate supply?
D. Recessions
- Decline in the economy's output
- Occurs if the aggregate demand curve shifts to the left
- Shift of aggregate supply
E. Gross Domestic Product (GDP)
- Value of all final goods and services produced by the economy in a year
- Nominal GDP: Using current prices
- Real GDP: Corrected for inflation
F. Limitations of GDP
- Does not measure welfare, or success in development, by itself
- Does not say whether it merely offsets some natural disaster
- Excludes non-market activities
- Does not account for environmental costs
- Human Development Index, an alternative measure of development
G. The business cycle
- Short-run fluctuations in business activity
- Recession - Trough - Expansion - Peak
- NBER, the business cycle dating agency
H. Notable macroeconomic events
- The Great Depression (1929-1933): High unemployment
- World Wars I and II: High growth rate of GDP
- Stagflation (1973-1980): High unemployment and inflation
- The Reagan Years (1980-1988): Falling unemployment and inflation
- The Clinton Years: The booming 1990s
- A mild recession in 2001
- The Great Recession of 2008-09
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What is Gross Domestic Product?
A comprehensive measure of U.S. economic activity. GDP measures the value of the final goods and services produced in the United States (without double counting the intermediate goods and services used up to produce them). Changes in GDP are the most popular indicator of the nation's overall economic health.
BEA estimates the nation's GDP for each year and each quarter. But new GDP statistics are released every month. Why? Because for each quarter, BEA estimates GDP three times. The advance estimate, coming about a month after the quarter's end, is an early look based on the best information available at that time. The second estimate and third estimate each incorporate additional source data that weren't available the month before, improving accuracy.
Source: Bureau of Economic Analysis |