Compare And Contrast Micro And Macroeconomics

Macroeconomics in contrast to micro, analyses the economy as a whole. It is the study of economic wide phenomena including inflation, unemployment and economic growth. Thus measuring the income of a nation forms a very vital part of seeing how economies are doing in comparison to others. The tool, which takes care, is referred to as the GDP (Gross Domestic Product). The GDP is the total market value of a countries output. It is the market value of all final goods and services produced within a given period of time by factors of production located within a country. Let us first see how can we calculate GDP.

The usual approach is known as the expenditure method in which we add the total amount spent on final goods during a said time period. We can compute the GDP by adding these 4 components.
Any good/service being produced or used domestically would not contribute to the GDP of the nation even though they amount to real production. Apart from this it only takes into account the legal transactions that take place, underground economy is not reflected in the GDP. The size of underground economies differs from nation to nation. For example Italy’s GDP would be much higher if we considered its underground sector as part of the economy, while Switzerland’s GDP would change very little. A healthy and clean environment is surely an integral part for a good life, however this calculation tool does not take this into account. A nation may have a high per capita GDP but if it has a poor environment for the citizens the well being on the whole is bound to fall. GDP also does not take into account the economic disparities between different groups. GDP per person may be the same but one society may be better of than the other. GDP gives us a holistic picture of the country producing goods and services however fails to give us any information on the breakup of an individual average