Macro Economics

The study of how households and firms make decisions. And how they interact in markets.

The study of economy-wide phenomena, including inflation, unemployment, and economic growth.

• measures total income of everyone in the economy.
• measures total expenditure on the economy’s output of goods and services. 

Is the market value of all final goods & services produced within a country in a given period of time.

Recall : GDP is the total spending.

4 components.

• Consumption (C)
• Investment (I)
• Government Purchases (G)
• Net Exports (NX)

 Consumption is total spending by households on goods and services..

Investment is total spending on goods that will be used in the future to produce more goods.

includes spending on:

• capital equipment (e.g., machines, tools)
• structures (factories, office buildings, houses)
• inventories (goods produced but not yet sold)

Goverment Purchases is all spending on the g&s purchased by govt at the federal, state, and local levels.

• G excludes transfer payments, such as Social Security or unemployment insurance benefits. They are not purchases of goods and services..