Macroeconomics Exam Review Chapter 6 Assessing the Health of the Economy: Performance & Policy Macroeconomists focus on:  Real GDP  Unemployment  Inflation Real GDP  Measures the value of final goods and services produced within a border of a given country during a time period, typically a year  To calculate real GDP, nominal GDP must be first calculated Unemployment  A failure of the economy to fully employ its labour force  Occurs when a person cannot get a job despite being willing to work and actively seeking work Inflation  An increase in the overall level of prices  Can cause decreases in standard of living  Surprise jump in inflation reduces the purchasing power of people’s savings Macroeconomics Models help clarify government economic policies  Can governments promote long-run economic growth?  Can government reduce the severity of recessions?  Are certain government policy tools, more effective than others e.g. monetary policy versus fiscal policy?  Is there a trade-off between lower rates of unemployment and higher rates of inflation  Does government policy work best when it is announced in advance when it is a surprise? The Miracle of Modern Economic Growth • Modern economic growth refers to an increase in output per person as compared with earlier times. • The vast differences in living standards seen today between rich and poor countries are almost entirely the result of the fact that only some countries have experienced modern economic growth. Savings, Investment, and Modern Econom