Final answer:
The most closely watched macroeconomic variable in the world is the Gross Domestic Product (GDP), which measures the size and growth of an economy. However, GDP does not capture everything about an economy.
Step-by-step explanation:
The most closely watched macroeconomic variable in the world is the Gross Domestic Product (GDP). Economists use GDP to measure the size and growth of an economy. It represents the total value of all final goods and services produced within a country in a given year. For example, in 2020, the U.S. GDP was $20.9 trillion, making it the largest GDP in the world.
GDP is an essential indicator because it provides insights into the overall health and performance of an economy. It helps policymakers, investors, and analysts make informed decisions about economic conditions and trends. However, it is important to note that GDP does not capture everything about an economy. It does not account for factors like income distribution, quality of life, environmental sustainability, and the informal economy.