The chapter documents how U.S. economic growth, labor productivity growth, and labor’s share of output have evolved over time. Issues concerning the estimation of the economy’s productive potential are discussed, including problems associated with factor aggregation, the theoretical and empirical use of production functions, and growth accounting. The role that estimates of potential output should play in the policy process is also considered.

Theoretical and empirical descriptions of the Beveridge curve are critiqued. The lack of empirical evidence for a matching function is discussed together with a simple example of how the aggregate unemployment rate is determined by underlying labor-market flows. The relation of output growth to changes in the unemployment rate (Okun’s law) is estimated at the aggregate level and for various demographic groups, and the practical usefulness of Okun’s law is examined. The role that estimates of the natural rate of unemployment should play in the policy process and the usefulness of the natural rate concept are also examined.

Some miscellaneous topics pertaining to economic measurement are discussed, including the idealized "units" (dimensions) of economic variables; the effect that quarterly and annual averaging can have on the time series properties of a variable; and how growth rates are computed by U.S. statistical agencies.

The chapter examines empirical evidence on the size of the Keynesian multiplier, and discusses how the multiplier emerges from a classical macroeconomic model when market clearing is absent. The potential dependence of the multiplier on the state of the economy is discussed in the context of this model. Measures of fiscal stance are compared; in addition, the theory and practice of government debt management are contrasted.

A simple empirical model describing how U.S. inflation dynamics have evolved over the post-WWII period is constructed; the results are used to evaluate various interpretations and theories of the inflation process. Changes in the slope of the price Phillips curve and the relative stability of the wage Phillips curve are documented. Macro and micro evidence for the empirical role of inflation expectations in the inflation process is critiqued. The chapter also discusses supply shocks and whether there was "missing disinflation" after the 2007-2009 recession. Finally, empirical measures of aggregate price-cost margins are compared.

Empirical models of consumption, investment, and net exports are constructed and compared with predictions from theoretical models. The role of inventory investment in economic fluctuations is discussed. The empirical dependence of aggregate demand on aggregate output and income is computed, resulting in a rough estimate of a Keynesian (demand) multiplier.

The chapter examines how to decompose macroeconomic data into trend and cyclical components, and whether doing so is innocuous. The nature of business cycles is examined; specifically, whether a shock-propagation or regime-switching framework is more useful for understanding economic fluctuations. The chapter also discusses whether the economy has self-correcting tendencies that cause it to return to full employment following a recession.

Discusses how U.S. economic data are seasonally adjusted, and provides an example of seasonal adjustment using the Census X-11 filter.

The two main sources of aggregate employment data in the U.S., the household survey (CPS) and the establishment survey (CES), are described.

The inability of mainstream macroeconomic analysis to sensibly answer important practical questions is reviewed. The problem is discussed in terms of the incentives that mainstream academic economists face regarding career advancement, and the resulting (and increasingly negative) effect on economic analysis in policy institutions is documented. The social role of economics is considered, and a code of conduct for policy analysts is proposed.

The chapter provides a brief conceptual overview of how output is measured in the U.S. National Income and Product Accounts (NIPAs).

The chapter surveys the current disconnect between academic economics and the economic analysis that is conducted at policy institutions. It argues that microfoundations and general equilibrium theory are not useful for thinking about important questions in macroeconomics, and assesses some alternative approaches that have been proposed. The usefulness of aggregate data for empirical analyses is briefly discussed.