Maybe you don’t like watching the news, but when you turn on the news by mistake, all you hear about are economic crises here and there, and this makes your dislike for the news even worse. Well, the news has followed you onto StudySmarter today! Haha – just kidding. Seriously, though, issues that affect economies are a real thing. They’re just not as boring as the news makes it seem. Macroeconomic issues involve the things that matter to the overall well-being of the economy. Things like what causes the dollar to be of less value compared to another currency or why some people are unemployed and homeless. Macroeconomic issues even cover how the US is richer than other countries and why it gets richer or poorer sometimes! You must be curious at this point. Read on for an interesting discussion!
Macroeconomic Issues Definition
Let’s jump right into the definition of macroeconomic issues. Economists are always interested in how economies work, what makes them more successful, or what makes them less successful than other economies. The factors that explain the macroeconomic performance of an economy are known as macroeconomic issues. To do this, economists use information gathered from the economy to conduct analyses that give an idea of how the economy is performing.
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You should know that economists could look at countless things when trying to assess macroeconomic performance.
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It can be difficult to navigate all these considerations in one shot and explain it to others, and therefore, economists focus principally on Gross Domestic Product (GDP), unemployment, and inflation. Generally, these three constitute macroeconomic issues.
Current Macroeconomic Issues
What constitutes the current macroeconomic issues? Now, we have said that the macroeconomic issues include GDP, unemployment, and inflation. However, what are these? And what makes them issues? Let’s find out.
Real Gross Domestic Product as a macroeconomic issue
When economists mention the GDP, they often mean real GDP. This is because the real GDP is different from the nominal GDP, and we will explain this. The real GDP is a measure of the value of all final goods and services produced in an economy during a given period, often a year.
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The real GDP is one of the macroeconomic issues because it is an important indicator of whether the economy’s output is growing or declining. Obviously, if the economy’s output is declining, then we have a serious problem on our hands, and this is why economists are so concerned about the real GDP. How will we know if the economy’s output is growing or declining? Simple, we will compare the previous year’s real GDP to the current year’s real GDP.
So, we know how the real GDP is one of the macroeconomic issues. But why do we add “real” to it? Let’s explain.
Economists determine the real GDP by first computing the nominal GDP, which is the dollar value of all goods and services an economy produces in a given year, based on the prices when those goods and services were produced.
After determining the nominal GDP, economics takes into consideration the changes in prices that occur over different years. Therefore, real GDP uses a constant value for the economy’s output. This gives a true picture of the GDP, whose goal is to measure the real value of an economy’s output. Consider the following example.
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