This chapter has discussed how economists measure the total income of a nation. Measurement is, of course, only a starting point. Much of macroeconomics is aimed at revealing the long-run and short-run determinants of a nation’s gross domestic product. Why, for example, is GDP higher in the United States and Japan than in India and Nigeria? What can the-governments of the poorest countries do to promote more rapid growth in GDP? Why does GDP in the United States rise rapidly in some years and fall in others? What can U.S. policymakers do to reduce the severity of these fluctuations in GDP? These are the questions we will take up shortly At this point, it is important to acknowledge the significance of just measuring GDP. We all get some sense of how the economy is doing as we go about our lives. But the economists who study changes in the economy and the policy makers who formulate economic policies need more than this vague sense-s-they need concrete data which to base their judgments. Quantifying ‘the behavior of the economy with statistics such as GDP is, therefore, the first step to developing a science of macroeconomics.

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