Chapter 23: Measuring a Nation's Income

Chapter 23 discusses how macroeconomics deals with the economy of every country, not just of an individual firm or market. The goal of macroeconomics is to explain the economic changes that affect many households, firms, and markets simultaneously. It addresses and measures the total income of everyone in the economy (GDP), the rate at which average prices are rising (inflation), the percentage of the labor force that is out of work (unemployment), total spending at stores (retail sales), or the imbalance of trade between the United States and the rest of the world (the trade deficit).GDP, which is gross domestic product and how it is measured. It talks about how it is used to compare the well-being of other nations.The GDP of a country only includes things that were made and sold within the country, so it excludes any exports. Imports have a negative value on GDP. The chapter talks about how it is difficult to actually use GDP as an accurate measure of a country's well being because it excludes benefits from things such as the elimination of pollution. To understand how the economy is using its scarce resources, they divide G (devoted as Y) into four components: consumption (C), investment (I), government purchases (G), and net exports (NX): Y= C + I + G + NX. This equation is an identity, which must be true because of how the variables in the equation are defined.