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Learning Basic Macroeconomics by Hal W. Snarr

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CHAPTER 2

Macroeconomic Indicators

Inflation, interest rates, economic growth, and unemployment are key macroeconomic indicators used in assessing the overall health of the economy.1 Understanding them is important because they are interrelated. For example, accelerating economic growth increases real gross domestic product (GDP) relative to potential output. This pushes unemployment below its natural rate. As unemployment falls, labor markets tighten. This puts upward pressure on wages, as firms compete for fewer and fewer workers to keep pace with strong product demand. If firms pass on higher and higher production costs to consumers, inflation rises. This may lead to higher interest rates.

Inflation

Most textbooks define inflation as a general ...

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