SSEMA 1, 2.3SSEMA 1, 2.3

What is Macroeconomics?The study of the performance of our economy

as a whole

Key Economic IndicatorsThis information gives an idea of how the

economy is performing

#1: Gross Domestic ProductThe total dollar value of all final goods and

services produced in a nation in a year.

Calculating GDPGDP = C + I + G + (X-M)

C = consumer spending I = business investment

G = government spending (X-M) = net exports (total exports – total

imports)

Why is GDP important?Shows the economic growth of a country (if

real GDP has increased, there is economic growth)

#2: Consumer Price Index (CPI)Measure of inflationInflation causes an increase in the average

price of goods and services

Calculating CPICPI = (market basket price in a given

year/market price in the base year) X 100

#3: Unemployment RateThe percentage of people age 16+ , actively

looking for jobs, and able to workDoes not include discouraged workers,

under-aged, retired, or underemployed people

Calculating Unemployment RateUnemployment rate = number of people

looking for work number of people in the

labor force

Four Types of Unemployment

#1: Structural UnemploymentThe skills of the labor force do not match

those that employers needInvestment in education and training reduces

structural unemployment

#2: Frictional UnemploymentOccurs when people decide not to take a

particular job because they are looking for a better job

#3: Cyclical Unemployment Occurs because of downturns in the economyResult of production cutbacks => layoffs