The macroeconomy can be classified into three themes: GDP, inflation, and unemployment. GDP is the sum of all productivity within a country for a given year, inflation is the rate at which prices rise over time, and unemployment calculates the number of residents who are not currently employed. These factors are influenced by government regulations, fiscal policies, and business cycles.
While economic growth, consumer engagement, and overall financial conditions vary by country or region, broad macroeconomic variables remain constant. Specific components and factors influencing the macroeconomy can be classified into three broad themes: gross domestic product (GDP), inflation and unemployment. Government regulations, fiscal policies, the consumer price index (CPI), access to credit, and business cycles are all common macroeconomic variables discussed by politicians and economists. Each of these influential topics falls under one of three major macroeconomic variables.
Gross Domestic Product (GDP) is the sum of all productivity within a country for a given year. GDP includes all domestic manufactured products, all products and livestock, all asset valuation increases, and intangible investment growth. Typically, these figures are referred to as GDP or GDP per capita. GDP per capita is calculated by GDP divided by the population of a particular country.
For example, a country might have a GDP of $200 billion US dollars (USD), with a population of 200 million people. In analyzing macroeconomic variables, an economist calculates per capita GDP by dividing $200 billion USD by 200 million, resulting in $1,000 USD of output produced per person, per year. In determining factors such as economic growth, GDP and GDP per capita provide an aggregated view of productivity for comparison with previous years, other economies, or as part of a global-scale macroeconomics study.
Inflation is, in its simplest terms, the rate at which prices rise over a period of time. Smaller components, such as the consumer price index, fiscal policies, commercial banking, and access to credit play a role in either upward or downward inflation. Limited access to credit, for example, can limit the amount of raw materials a producer can purchase and, therefore, limit supply. Scarce supply and rising production costs lead to higher prices, especially when demand is high. Seen in terms of macroeconomic variables, high or rapid price inflation can limit economic growth and over time reduce GDP from one year to the next.
Unemployment simply calculates the number of residents who are not currently employed but are actively looking for work. Some unemployment calculations also include those people who are considered underemployed. Underemployed people are those workers who have accepted part-time positions or positions for which they are severely overqualified. High unemployment rates have a clear influence on consumer spending, but they also indicate low employment growth in both the private and public sectors.
Individual macroeconomic variables, such as banks, the consumer price index, and government regulatory changes, influence each multiple areas of economic growth. While the consumer price index, a historical tracking of the prices paid for various goods by consumers, might rank under inflation, it also affects GDP and ultimately affects unemployment. Each factor within a particular economy has a complex relationship and variable effect on other factors.
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