Introduction
Macroeconomics can be defined as the study of the entire economy (Chari & Kehoe, 2006, p. 3).The key problems facing policy makers are how to improve people standard of living in order to achieve economic growth while at the same time controlling inflation and unemployment (Gans, King, Stonecash and Mankiw, 2009, p. 11). However, the aim of discussion is to analyses how “a country’s standard of living depends on its ability to produce goods and services”.
Review Lessons (principles) 8 Gans, et al (2009, p. 11) stipulated that “a country’s standard of living may be measured by comparing personal incomes or by comparing the total market value of a nation’s production”. People living in high-income countries may have a better standard of living than people living in low-income countries because they can afford cars, houses, clothes, furniture, appliances, foods, education and more (Chari & Kehoe, 2006, p. 3). Hobijn and Steindel (2009, p. 2) suggested that the living standard can be determined by looking at the country GDP which stands for “gross domestic product”. Nevertheless, the focus of this discussion is on the real GDP because it measures the production of goods and services at constant prices as it is a pretty good indicator of individual material standard (Hobijn & Steindel, 2009, p. 2). Appendices A and B highlights countries with the highest and lowest GDP per capita in the world. GDP per capita gives the average amount of income that each member of the population potentially has access to. Hence, the more money each individual can access to, the higher the potential standard of living. For instance, Switzerland’s real GDP expanded by 0.6% in the 1st quarter 2013 compared to the previous quarter as highlight in the table 1 below (State Secretariat for Economic Affairs, 2013). This shows that their citizens are able to afford