CH 19 - What Macroeconomics is all about

CH 19 - What Macroeconomics is all about - CHAPTER 19 WHAT...

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CHAPTER 19 WHAT MACRO ECONOIMCS IS ALL ABOUT SUMMARY 19.1 KEY MACROECONOMIC VARIABLES The value of the total production of goods & services in a nation is called its national product. Because production of output generates income in the form of claims on that output, the total is also referred to as national income. One of the most commonly used measures of national income is gross domestic product (GDP) Potential output is the level of output produced when factors of production are employed at their normal intensity of use. The output gap is the difference between actual & potential output The unemployment rate is the percentage of labor force not employed and actively searching for a job. The labor force and employment have both grown steadily for the past half century from year to year. Unemployment imposes serious costs on the Labor productivity is measured as real GDP per employed worker. It is an important determinant of material living standards The price level is measured by a price index, which measures the price of a set of goods in one year relative to their price in a base year. The inflation rate measures the rate of change of the price level. Although it fluctuates considerably, the inflation rate has been consistently positive. The interest rate is the price that is paid to borrow money for a stated period, and is expressed as a percentage amount per dollar borrowed. The nominal interest rate is this price expressed in money terms; the real interest rate is this price expressed in terms of goods or purchasing power The exchange rate is the number of Canadian dollars needed to purchase one unit of foreign currency. A rise in the exchange rate is a depreciation of the Canadian dollar, a fall in the exchange rate is an appreciation of the Canadian dollar Aggregating Total Output National Income: Recent History o Real GDP measures the quantity of total output produced by the nation’s economy over the period of a year
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CH 19 - What Macroeconomics is all about - CHAPTER 19 WHAT...

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