When the economy of a nation is in an abridged context, it appears that the output degrees of all the commodities and services in the economy have a tendency to move together. For example, if the outcome of a food item experiences a development, then normally, it accompanies an increase in the output degree of industrial commodities.
Also, within the classification of industrial commodities, the output of different kinds of commodities tend to increase or decrease concurrently. Similarly, the cost price of distinct commodities and services have a tendency to increase or decrease concurrently. It is noticeable that the employment degree in different manufacturing units simultaneously increases or decreases.
If the average output degree, cost price degree, or employment degree in the different manufacturing units of an economy, reinforce close association to each other, then the task of scrutinising the entire economy becomes relatively easy. Instead of dealing with the given variables at disaggregated degrees, we can think of a single commodity as the degree of all the commodities and services manufactured within the economy.
This characteristic commodity has a degree of production that is commensurate to the average production degree of all the commodities and services. Similarly, the cost price or employment degree of this representative commodity reflects the general cost price and employment degree of the economy.
Generally, in macroeconomics, we clarify the survey of how the nation’s total manufacture and the degree of employment are associated with the features (variables), like cost prices, wage rates, rate of interest, profits, etc., by concentrating on a single imaginary good and what happens to it.
We can manage this clarification and completely forego studying about what happens to the real goods that are purchased and sold in the marketplace. Due to this we generally see what happens to the cost prices, wages, interests, and profits, etc., for one good more or less also happens for the others.
Especially, these features begin to change quickly, when the prices increase (known as inflation) or employment and production degrees decrease (heading towards a depression). The common directions of the movements of these variables for all the individual goods are normally similar to that of the aggregates for the economy.
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