Module 1 – Key Macroeconomic Indicators and their Measurement

If Z = X/Y and the growth rate of each variable is represented by its lower case counterpart, then z is approximately equal to x – y.

What are the key macroeconomic variables?

Gross Domestic product (GDP)

Real GDP = Y

GDP is a measure of the total income earned in the economy. When divided by population, it gives average income or per capita GDP. GDP is also a measure of the total expenditure in the economy.

GDP is the market value of all final goods and services produced in a country during a given period.

The Real GDP is a concept and the contant-price GDP is a measure.

The constant-price GDP is one way to measure the real GDP, but it is not an exact and perfect measure.

The constant-price GDP method:
– is sensitive to the choice of base year
– encounters difficulties as new products are introduced and existing products undergo quality change
– may underestimate the contribution of products with rising demand and overestimate the weight of products with declining demand

The measure of GDP at market exchange rate grossly underestimates the level of economic activity in developing countries measured by PPP GDP.

The level of chain-rule GDP and constant-price measure GDP are the same for two consecutive years, with the former being base-year in constant-price measure GDP.

Unemployment Rate (U)

The unemployment rate is the share of jobless individuals among adults who are seeking work or have a job.

LFP Rate = Labor Force / Adult Population * 100

Unemployment Rate = Number Unemployed / Labor Force * 100


Inflation Rate (Pi)

Interest Rate

Nominal Interest Rate = i

Return on loans: Payment for the right to use financial resources (as percent of the loan amount).


Exchange Rate (e)

The exchange rate is the number of foreign currency units one can buy with one unit of domestic currency.

How are they measured and interpreted?

What are the sources of macroeconomic data?

Federal Reserve Economic Data (FRED)

The Bureau of Economic Analysis

The Bureau of Labor Statistics

The World Bank’s “World dataBank”

International Monetary Fund

The Groningen Growth and Development Centre Database