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Macroeconomics: Relating to the economy as a whole rather than emphasizing its individual parts. Three Basic goals of Macroeconomics A. Growth B. Jobs C. Stable prices Organizing Topics: 1. Growth, Employment, and Inflation 2. Business Cycles 3. Policy Alternatives Growth Federal Reserve seeks to stimulate growth in the economy by: 1. Interest Rates 2. Controlling the flow of money A. Discount Rates – rate of interest banks receive from the Fed. B. Federal Requirements (80% rule) Business increases their factor of production. Measuring Growth Simon Kuznets –In 1932 developed the framework for the statistic known as Gross National Product (GNP) referred to now as Gross Domestic Product (GDP) Components of GDP 1. Gross investment 2. Government purchases 3. Consumption expenses 4. Net result of international transaction (Net Exports) Reflect fully what our nation’s businesses have produced GDP not sole figure for calculating annual production. Net National Product (NNP) A national accounting aggregate equal to the GDP less depreciation. The NNP thus reflects not only new goods and services produced but also the extent to which existing capital has worn out. Depreciation: A money value that represents the extent to which a capital good has become less efficient because of age. E.g. Freezer at the supermarket can no longer keep the cool temperature it once did---depreciation tells us how much this freezer has depreciated in price. Capital consumption allowance: Depreciation (difference between GDP and NNP) National Income (NI): A national accounting aggregate equal to the amount of money individuals and businesses receive for productive factors provided. It comprises wages, salaries, rent, interest, profits from corporations, profits from unincorporated businesses. The difference between the national income and the net national product is indirect business taxes.