Chapter 1 measuring macroeconomic performance: output and prices. Microeconomics studies individual decision making processes and outcomes. Macroeconomics studies the aggregate impact of individual decisions. Concerned with three key themes: making judgements about the performance of the economy, understanding the factors that have produced particular macroeconomic outcomes, the role of government in influencing macroeconomic performance. This is done by adding up the market value of all the given goods and services. Note: purchase of consumer durables is part of gdp as c, government transfers is not part of gdp, building of houses and apartments is part of investment, the difference in inventories is part of investment. Includes inventories (unsold goods) which are treated as though the company has purchased them: consumption expenditure (c) spending by households on goods and services. The production method: multiplies that number of final goods and services produced by their market value irrespective of who purchases them.