Annexe I: Basic concepts of macroeconomics
At the national level
- Economic aggregates
‘Aggregate’ literally means ‘collection’ or ‘total’. Economic aggregates are variables that measure the total economic activity for a nation state or a region. For example, the main economic aggregate is Gross Domestic Product (GDP), which measures the total value of all the goods and services produced in a country.
The total amount of goods and services that people will purchase in an economy during a specific time period.
The total amount of goods and services that firms will produce and sell during a specific time period.
- Economic growth
‘Economic growth’ refers to an increase in the capacity of an economy to produce goods and services in a specific period, compared to an earlier period. Rate of economic growth (or economic growth rate) is the expression of this growth in terms of percentage change. What is considered a factor for economic growth, and how the growth is measured and quantified, all affect what gets prioritised or overlooked in macroeconomic policies.
Technology is one of the main factors that affect economic growth. It can make production more efficient through the introduction of new equipment or machines (invention) or new methods of production (innovation). An increase in the quality or quantity of human capital can also make the production more efficient, thus triggering economic growth. For example, a better educated and qualified workforce often has a positive impact on the economy.