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Macroeconomics

Definition

Macroeconomics is a branch of economics dealing with the performance, structure, behavior, and decision-making of an economy as a whole. This includes regional, national, and global economies.

What is 'Macroeconomics'

Macroeconomics is a branch of the economics field that studies how the aggregate economy behaves. In macroeconomics, a variety of economy-wide phenomena is thoroughly examined such as, inflation, price levels, rate of growth, national income, gross domestic product and changes in unemployment.

Explaining 'Macroeconomics'

Macroeconomics differs from microeconomics, which focuses on smaller factors that affect choices made by individuals and companies. Factors studied in both microeconomics and macroeconomics typically have an influence on one another. For example, the unemployment level in the economy as a whole has an effect on the supply of workers from which a company can hire. Macroeconomics, in its most basic sense, is the branch of economics that deals with the structure, performance, behavior and decision-making of the whole, or aggregate, economy, instead of focusing on individual markets.

The Study of Macroeconomics

Those working in the field of macroeconomics study aggregated indicators such as unemployment rates, GDP and price indices, and then analyze how different sectors of the economy relate to one another to understand how the economy functions. Macroeconomists develop models explaining relationships between a variety of factors such as consumption, inflation, savings, investments, international trade and finance, national income and output. Contrarily, microeconomics analyzes how individual agents act, namely consumers and corporations, and studies how these agents' behavior affects quantities and prices in certain markets. Such macroeconomic models, and what the models forecast, are used by government entities to aid in the construction and evaluation of economic policy.

Specific Areas of Research

Macroeconomics is a rather broad field, but two specific areas of research are representative of this discipline. One area involves the process of understanding the causation and consequences of short-term fluctuations in national income, also known as the business cycle. The other area involves the process by which macroeconomics attempts to understand the factors that determine long-term economic growth, or increases in the national income.

History of Macroeconomics

Macroeconomics, as it is in its modern form, started with John Maynard Keynes and the publication of his book "General Theory of Employment, Interest and Money" in 1936. Keynes offered an explanation for fallout from the Great Depression, when goods remained unsold and workers unemployed, a feat that left classical economists stumped. Keynes' theory explained why markets may not clear. This theory evolved throughout the 20th century, diverting into several macroeconomic schools of thought known as Keynesian economics, often referred to as Keynesian theory or Keynesianism.


Further Reading


Modeling bond yields in finance and macroeconomics
pubs.aeaweb.org [PDF]
… or finance. One of the unusual features of this book is that it touches on many different topics, and yet it is not meant as an introductory text to macroeconomics, monetary economics, or finance. The reason …

Should macroeconomic forecasters use daily financial data and how?Should macroeconomic forecasters use daily financial data and how?
www.tandfonline.com [PDF]
… or finance. One of the unusual features of this book is that it touches on many different topics, and yet it is not meant as an introductory text to macroeconomics, monetary economics, or finance. The reason …

Financial intermediation and macroeconomic analysisFinancial intermediation and macroeconomic analysis
www.aeaweb.org [PDF]
… or finance. One of the unusual features of this book is that it touches on many different topics, and yet it is not meant as an introductory text to macroeconomics, monetary economics, or finance. The reason …

Fire sales in finance and macroeconomicsFire sales in finance and macroeconomics
www.aeaweb.org [PDF]
… or finance. One of the unusual features of this book is that it touches on many different topics, and yet it is not meant as an introductory text to macroeconomics, monetary economics, or finance. The reason …

Financial market integration and macroeconomic volatilityFinancial market integration and macroeconomic volatility
www.jstor.org [PDF]
… or finance. One of the unusual features of this book is that it touches on many different topics, and yet it is not meant as an introductory text to macroeconomics, monetary economics, or finance. The reason …

Macroeconomic effects of financial shocksMacroeconomic effects of financial shocks
www.aeaweb.org [PDF]
… or finance. One of the unusual features of this book is that it touches on many different topics, and yet it is not meant as an introductory text to macroeconomics, monetary economics, or finance. The reason …

Critical perspectives on financial and economic crises: Heterodox macroeconomics meets feminist economicsCritical perspectives on financial and economic crises: Heterodox macroeconomics meets feminist economics
www.tandfonline.com [PDF]
… or finance. One of the unusual features of this book is that it touches on many different topics, and yet it is not meant as an introductory text to macroeconomics, monetary economics, or finance. The reason …



Q&A About Macroeconomics


Why do economists study these factors?

To understand how the economy functions.

What are some factors studied in both microeconomics and macroeconomics?

Unemployment level, supply of workers, inflation.

What is macroeconomics?

Macroeconomics is a branch of economics that studies how the aggregate economy behaves.

What are some factors studied in macroeconomics but not microeconomics?

National income, gross domestic product, changes in unemployment.