Macroeconomics is the study of the economy as a system.

The labour force is people at work or looking for work. It excludes people neither working nor looking for work. The unemployment rate is the fraction of the labour force without a job.

Real gross national product (GNP) measures the income of an economy, the quantity of goods and services the economy can afford to purchase.

The inflation rate is the percentage increase in the average price of goods and services.

The circular flow shows how real resources and financial payments flow between firms and households.

Gross domestic product (GDP) measures the output made in the domestic economy, regardless of who owns the production inputs.

Value added is the increase in the value of goods as a result of the production process.

Final goods are purchased by the ultimate user, either households buying consumer goods or firms buying capital goods such as machinery. Intermediate goods are partlyfinished goods that form inputs to a subsequent production process that then uses them up.

Investment is the purchase of new capital goods by firms.

A leakage from the circular flow is money no longer recycled from households to firms. An injection is money that flows to firms without being cycled through households.

Inventories or stocks are goods currently held by a firm for future production or sale.

GDP at market prices measures domestic output inclusive of indirect taxes on goods and services. GDP at basic prices measures domestic output exclusive of indirect taxes on goods and services. The former exceeds the latter by the amount of revenue raised in indirect taxes.

Exports (X) are domestically produced but sold abroad. Imports (Z) are produced abroad but purchased for use in the domestic economy.

GNP (or GNI) measures total income earned by domestic citizens regardless of the country in which their factor services were supplied. GNP (or GNI) equals GDP plus net property income from abroad.

Depreciation or capital consumption is the rate at which the value of the existing capital stock declines per period as a result of usage or obsolescence.

National income is the economy’s net national product. It is calculated by subtracting depreciation from GNP at basic prices.

Nominal GNP measures GNP at the prices prevailing when income was earned.

Real GNP, or GNP at constant prices, adjusts for inflation by measuring GNP in different years at the prices prevailing at some particular date known as the base year.

The GNP deflator is the ratio of nominal GNP to real GNP expressed as an index.

Per capita real GNP is real GNP divided by the total population. It is real GNP per head.