Chapter Overviews

Chapter 12: Macroeconomic Performance

Chapter Overviews

Section 1: Measuring the Nation's Output and Income

Macroeconomics is the branch of economics that deals with the economy as a whole, using aggregate measures of output, income, prices, and employment. Gross Domestic Product (GDP) is the nation's most comprehensive measure of total output. Gross National Product (GNP) is derived from GDP and is the most comprehensive measure of total income. Four other measures of income are net national product, national income, personal income, and disposable personal income. Economists view the economy as being organized into four sectors: the consumer or household sector, the investment sector, the government sector, and the foreign sector. These sectors are then combined to form the output-expenditure model, which is written as GDP = C + I + G + F.

Section 2: Population and Economic Growth

The population census, an official count of all people living in the United States, must be conducted every 10 years. The annual rate of population growth was more than three percent until the Civil War, but it has declined steadily since then and is now less than one percent annually. Factors contributing to this trend are a replacement level fertility rate, a longer life expectancy, and constant net immigration. The racial and ethnic mix will also change with gains made by Asians, Hispanics, and African Americans. Changes are gradual and can usually be predicted.

Section 3: Poverty and the Distribution of Income

People are classified as living in poverty if their incomes fall below a predetermined level, or threshold. Economists are interested in how many people are in poverty and how it is dispersed among households. There are eight reasons why incomes vary: education, wealth, tax law changes, decline of unions, more service jobs, monopoly power, discrimination, and changes in family structures. In order to assist people in poverty, the government has established numerous anti-poverty programs. Most of them are classified under welfare: income assistance, general assistance, social service programs, tax credits, enterprise zones, workfare programs, and negative income tax.