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Macroeconomics is a very vast subject to study, but if we talk about its core, then we can say that it is similar to financial arrangements and the planning of a family. As the family members also need to decide and maintain a balance in their expenditures, income, and savings. Hence from the same, we can derive the equation of microeconomics, i.e., “Income = Expenses Done + Savings Made”, trying to maximize the savings. Macroeconomics works the same way. The only difference it has is that it deals with the finances of the whole country, and in a few of the cases, it even deals with a group of countries. 

Definition of Macroeconomics

Macroeconomics is known as the study of those things and factors that affect the national economy. To keep an economy stable, the government of that country looks into the factors concerning it, such as the unemployment rate, GDP, inflation rates, etc., and formulate its policies accordingly. 

When compared to microeconomics which deals with only the small prospects, macroeconomics is about looking at the financial decisions and performance of the whole country. Depending on the results of macroeconomics, the government made fiscal policies for providing its country with a better and brighter future. 

Now, as you have clarity about what macroeconomics is exactly, let us look at some of its factors. 

Factors of Macroeconomics

There are some factors of macroeconomics that help in knowing about the financial position and prospects of a whole country. Those factors have been described below:

  1. Gross Domestic Product (GDP): If we talk about the GDP in simple terms, it can be described as knowing about the monetary value of the production made by a country in a financial year. 

As you now know what GDP is, it is also important to understand how GDP is calculated. There are broadly three ways of collecting GDP, and they have been mentioned below: 

  1. Production/ Output Method: In this method, you need to calculate the final values of the products or goods produced and, after that, subtract the value of intermediate goods if there were any of them consumed during the process of production. 
  1. Expenditure Method: It is different from the method explained earlier. It is calculated by using a formula known as the expenditure formula; it has been given below: 

Gross Domestic Product (GDP) = Consumption (C) + Gross Spendings (G) + Investment in Capital (I) + Net Exports (NX)

*The new exports mean subtracting the net imports made from the net exports. 

Understanding this in simple terms, it means that it is assumed that the expenditure made will be done in any of the four forms mentioned above, and by doing the addition of all of them, the value of the total spending can be taken out, which is nothing but the GDP of a country. 

  1. Income Approach: As understood from the name of it, the income approach is nothing but the addition of all the interests, incomes, wages, rents and profits earned in a country. It will help us calculate GDP by knowing the total income of a country. From these incomes earned, you also need to subtract out the amount of taxes you submitted, subsidies or any of the other rebates for calculating the exact figure.  
  1. Inflation Rate: Another factor that is considered while calculating the GDP is the inflation rate. The GDP, which is calculated without taking into account the inflation rate, is known as nominal GDP. 

Unemployment Rate: 

This means the percentage of the population which is unemployed. It is mainly of two kinds mentioned below: 

  • Frictional Unemployment: It is the period when a person waits for joining a job or the time in between while switching from one job to another. 
  • Cyclic Unemployment: When there are any changes made in the economy, as the growth and contraction in the economy, some sectors of the economy are forced to shut down, this is when some of the employees lose their job. 

The content mentioned above and things will help you get a clearer picture of macroeconomics exactly and provide you with macroeconomics assignment help australia.  

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