IV. Listen, read and translate the text. What is macroeconomics?

WHAT IS MACROECONOMICS?

Macroeconomics emphasizes the interactions in the economy as a whole. It deliberately simplifies the individual building blocks of the analysis in order to retain a manageable analysis of the complete interaction of the economy.

For example, macroeconomists typically do not worry about the breakdown of consumer goods into cars, TV sets, calculators. They prefer to treat them all as a single bundle called 'consumer goods' because they are more interested in studying the interaction between households' purchases of consumer goods and firms' decisions about purchases of machinery and buildings.

Because these macroeconomic concepts are intended to refer to the economy as a whole, they tend to receive more coverage on television and in the newspapers than microeconomic concepts, which are chiefly of interest to those who belong to the specific group in question. To give an idea of the building blocks of macroeconomics, we introduce three concepts which you have probably read about in the newspapers or seen discussed on television.

Gross domestic product (GDP) is the value of all goods and services produced in the economy in a given period such as a year. GDP is the basic measure of the total output of goods and services in the economy.

The aggregate price level is a measure of the average level of prices of goods and services in the economy, relative to their prices at some fixed date in the past.

There is no reason why the prices of different goods should always move in line with one another. The aggregate price level tells us what is happening to prices on average. When the price level is rising, we say that the economy is experiencing inflation.

The unemployment rate is the percentage of the labour force without a job. By the labour force we mean those people of working age who in principle would like to work if a suitable job were available. Some of the landed gentry are of working age but have no intention of looking for work. They are not in the labour force and should not be counted as unemployed.

Already we can see two themes of modern macroeconomic analysis. Society reveals, both through statements by individuals and by the policy pronouncements of politicians who must submit themselves for re-election by the people, that it does not like inflation and unemployment. Yet for most of the 1970s economic interactions within and between national economies led to substantial inflation rates. In the 1980s, most Western economies faced sharp rises in the aggregate unemployment rate. Macroeconomists wish to understand how interactions within the economy can lead to these outcomes and whether government policy can make any difference.