Q.Briefly explain any four key macroeconomic aggregates that describe the overall state of an economy.

Macro Economics summarises an economy through a few economy-wide totals such as aggregate output, aggregate income, employment, the general price level and money supply.

Macro Economics describes the overall state of an economy through a small set of economy-wide totals called aggregates. Four important ones are:

1. Aggregate output (National Product). This is the total value of all final goods and services produced in an economy over a period, usually measured by Gross Domestic Product (GDP). It is the main indicator of the SIZE of an economy, and its growth rate is the standard measure of economic performance. It is a flow variable (produced per year).

2. Aggregate income (National Income). This is the total of all factor incomes — rent, wages, interest and profit — earned by a country's residents over a period. Because one person's spending is another's income, aggregate income is, in principle, equal to aggregate output. Per capita income (national income per head) is a rough indicator of average living standards.

3. Employment and unemployment. The total number of people employed, and the unemployment rate (the proportion of the willing labour force unable to find work), together show how fully the economy is using its most important resource — its people. A key macroeconomic concern is why involuntary unemployment can arise and persist.

4. The general price level. This is the average level of all prices in the economy, tracked by a price index. Its rate of change is what matters most: a sustained rise is inflation, a sustained fall is deflation. A stable price level protects the value of money and ordinary incomes. …

A common error is confusing national income (a flow, earned per year) with national wealth or money supply (stocks, held at a point in time), and adding them …