The three primary concerns in macroeconomic analysis

Economics is divided into two major areas, which are macroeconomics and

microeconomics. Macroeconomics involves the study of economic behavior as an entity while

microeconomics involves the study of individual behavior in line with their economic decisions.

The study of macroeconomics is extremely complex due to lots of factors influencing it (Course

details, 2012). Many macroeconomists try to concentrate on forecasting some crucial economic

conditions to help individuals, companies, and even governments in making ideal decisions.

Macroeconomic analysis dwell on three major things that are; Inflation, unemployment, and

national output.

National Output

National output refers to the quantity of goods and services that a country produces. In

economics, this is referred to as the GDP (Gross Domestic Product). National Output is a vital

concept of macroeconomist and must be put into consideration before making any economic

decision (Hess, 2013). When discussing about GDP, macroeconomists have a propensity of

using the “real GDP,” unlike the nominal GDP, which only reflects the changes in prices while

the “real GDP” considers inflation. Nominal GDP figures tend to be higher in instances where

inflation goes up from yearly, but not indicating a higher output level instead, it reflects higher

prices of goods and services.

The use of GDP has one major drawback, which is the collection of information after a

specified period (Hess, 2013). Once a sequence of figures has been put together over a certain

period, they are evaluated after which, economists and investors begin to making sense of the

figures. Based on the findings, the analyst can then initiate the task of forecasting the future state

of the economy. Again, it is through the presented GDP figures that macroeconomists determine
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the economic strength of a country. This cannot not be the presented in case of changes is

experienced in the current period (Hess, 2013).

Unemployment

The macroeconomists use the rate of unemployment to establish the sum or number of

people available in the labor pool and unable to gain employment. Macroeconomists have come

to a consensus that each an economy experiences rapid yearly growth as determined by GDP, the

rate of unemployment tend to be low. The low rate of unemployment is because of high output.

This calls for more laborers to sustain the high level of production hence creating more

employment opportunities.

Inflation

Inflation is another primary concern of macroeconomists hence focusing on the inflation

rate in line with the prices of goods and services in the market. There are two ways of measuring

or calculating inflation rate. These are; Consumer Price Index commonly referred to as (CPI),

and GDP deflator. The CPI presents the existing prices of a selected group of gods and services,

which is updated from time to time. The GDP deflator is “the ratio of nominal GDP to the real

GDP.” When the nominal GDP is higher that the real GDP, it can be assumed that the price of

goods and services are on the rise. According to the yearly survey, CPI and GDP deflator

towards the same direction and only differ by less than 1%.
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Reference

Hess, P. N. (2013). Economic Growth and Sustainable Development. Hoboken: Taylor and

Francis.

Course Details. (2012, October 6).Saylor Academy. Retrieved October 7, 2014, from

http://www.saylor.org/courses/econ102