Chapter 1. Measuring Economic AggregatesSimply put, macroeconomics is the study of economic aggregatesin the short run and in the long run. The word “aggregate” means sum total; so, as you might expect, macroeconomics deals with big variables like an economy’s gross output or national income. Other important economic aggregates are the overall price level, its rate of change (inflation and deflation), employment and unemployment. In macro theory we study determinant of the levels of economic aggregates and we investigate why many aggregates fluctuate in the short run and grow in the long run. We also study the relationships among certain aggregates, like inflation and unemployment (the well-known Phillips Curve).A useful source of online macro data to know about is FRED, maintained by the St. Louis Federal Reserve (). With FRED, you can easily download and graph more than 60,000 data series for the United States and many foreign countries. Its most frequently requested US data series include: the Consumer Price Index; gross domestic product (both current and constant dollars); civilian unemployment rate; total nonfarm employment; interest rates (on various assets like 10-year treasury bonds, 3-month treasury bills, 30 year mortgages and overnight federal funds); and several measures of the nation’s money supply. Data in this chapter are extracted from FRED and there are some suggested problems at the end of this chapter to introduce you to working with FRED.Traditionally, macroeconomics focuses on both the short run and the long run. In the short run, many economic variables—most especially total production—tend to fluctuate. Short run fluctuations are known as the business cycle, as the economy experiences regular upswings or expansions and downturns or contractions. In the long run, production and national income tend to grow. Long run macroeconomics studies living standards and the rate of economic growth.As we will see, short run and long run macroeconomics not only focus on different kinds of questions, but employ different economic models as well. In this book, we begin our study of macro theory with the short run (parts 2-4), before turning to thelong run (part 5). This is not because the long run is any less important, but simply because the short run so-often demands our current attention, as we focus on day-to-day headlines about recession, unemployment, inflation, government budget deficits and exchange rates. As the great 20thcentury British macroeconomist John Maynard Keynes famously observed: “in the long run, we are all dead.”Macroeconomics also focuses on the role of government policies to help stabilize theeconomy in the short run and to grow faster in the long run. These policies include monetary policy—setting interest rates and monetary aggregates—and fiscal policy—setting tax rates and spending levels. In the United States, the Federal Reserve conducts monetary policy while the Congress and President make fiscal policy.