2.2 — Macroeconomic indicators

2.2 — Macroeconomic indicators

  • Know what GDP, inflation, and unemployment measure — and what they miss.

  • Understand the difference between real and nominal GDP.

  • Be able to evaluate claims like 'the economy is doing well' by asking what indicator is being used. Gross Domestic Product (GDP). GDP is the total monetary value of all goods and services produced within a country in a given period (usually a year). It's the most-used measure of how big an economy is. When you hear 'economy grew by 3%' or 'the US economy is $28 trillion,' that's usually GDP. Real GDP adjusts for inflation — it measures actual production rather than price changes. Nominal GDP doesn't. For comparisons across time, use real GDP; comparing nominal GDP across years can be misleading because prices themselves change. GDP is useful, but it misses