What are the three primary concerns in macroeconomic analysis - Essay Example

The paper "Primary Concerns in Macroeconomic Analysis" is a good example of an essay on macro and microeconomics. 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 dwells on three major things that are; Inflation, unemployment, and national output.  National Output National output refers to the number 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 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 the economic strength of a country. This cannot be 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 the 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 goods 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 than 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%.