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Macroeconomics is the study of the performance, structure, behavior, and decision-making of an economy as a whole, including regional, national, and global economies. It examines aggregate measures such as gross domestic product (GDP), national income, unemployment, inflation, consumption, saving, investment, trade, and long-term economic growth. Unlike microeconomics, which focuses on individual consumers, firms, and markets, macroeconomics analyzes relationships among households, businesses, governments, and broad markets such as financial and labor markets. Macroeconomic analysis is organized around different time horizons. In the short run, it focuses on business-cycle fluctuations and aggregate demand, using monetary and fiscal policies to stabilize output and employment. In the medium run, output and unemployment are influenced by capital, technology, labor-market structures, and the natural rate of unemployment. In the long run, economic growth depends on human and physical capital accumulation, technological innovation, education, research and development, and demographic change. Macroeconomics also studies open economies, international trade, exchange rates, and the balance of payments, using models such as IS-LM, AD-AS, and growth models to explain economic outcomes and guide policy.
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National output is the total quantity of goods and services produced by an economy during a given period, and the income generated from producing and selling that output is equal to its total net output. Gross domestic product (GDP) is the main measure of national output and represents the value of final goods and services produced within a country's borders. Adding net factor income from abroad to GDP gives gross national income (GNI), which measures the income earned by a country's residents. GDP and GNI are usually similar, but they can differ substantially in countries with significant foreign assets, debt, or cross-border income flows. GDP can be measured using the expenditure approach: GDP equals consumer spending, government spending, investment, and net exports, calculated as exports minus imports. Nominal GDP values production at current prices, while real GDP adjusts for inflation to measure changes in actual output. The GDP deflator, calculated as nominal GDP divided by real GDP times 100, indicates the overall price-level change associated with domestic production. Economic output can increase through technological progress, capital accumulation, and improvements in education and human capital, although business cycles may cause short-term declines such as recessions.
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