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The most important concepts macroeconomists use are:Aggregate outputUnemploymentInflationThese three concepts are all connected with each other. Gross domestic product (GDP) can have three definitions:Market value of all the final goods and services in the economyThe sum of all the added value in the economySum of incomes in the economy Two types of GDP:Real GDP Measured in constant prices. Goods x constant price. Adjusted for inflation (Yt)Nominal GDPMeasured in current prices. Goods x current prices (€Yt)GDP Deflator: the ratio of nominal to real GDPAppendix (figure 1.1) GDP Deflator inflation: Measure of the increase in price level of goods produced in the economy during a given year, Yt.π =...
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