Before discussing macroeconomic models we must define what we mean by money. Money has a long and interesting history and an understanding of how we came to use money is useful for any macroeconomist. Unfortunately, there is not enough space to describe how money was “invented” and how it evolved over time. There are, however, many excellent descriptions on the Internet.

An important macroeconomic variable is the total amount of labor that is used in a certain time period. The amount of labor and the amount of capital are important explanatory variables for production and GDP. Another reason for the importance of the amount of labor is that it is related to the unemployment rate – a macroeconomic variable which is clearly important.

Perhaps the most important concept in macroeconomics is Gross Domestic Product (GDP): Gross Domestic Product (GDP) is defined as the market value of all finished goods and services produced in a country during a certain period of time.

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