Macroeconomics focuses on three things: National output, unemployment, and inflation. Governments can use macroeconomic policy including monetary and fiscal policy to stabilize the economy.
A macroeconomic factor is a phenomenon, pattern, or condition that emanates from, or relates to, a large aspect of an economy rather than to a particular population. Inflation, gross domestic product GDP , national income, and unemployment levels are examples of macroeconomic factors.
Examples of macroeconomic factors include economic outputs, unemployment rates, and inflation. These indicators of economic performance are closely monitored by governments, businesses and consumers alike. Macroeconomists develop models explaining relationships between these factors. Macroeconomic theory can also help individual businesses and investors make better decisions through a more thorough understanding of the effects of broad economic trends and policies on their own industries.
A macroeconomic factor is an influential fiscal, natural, or geopolitical event that broadly affects a regional or national economy. Examples of macroeconomic factors include economic outputs, unemployment rates, and inflation. Microeconomics focuses on supply and demand, and other forces that determine price levels, making it a bottom-up approach.
Macroeconomics takes a top-down approach and looks at the economy as a whole, trying to determine its course and nature. Macroeconomics focuses on three things: National output, unemployment, and inflation. Governments can use macroeconomic policy including monetary and fiscal policy to stabilize the economy. Central banks use monetary policy to increase or decrease the money supply, and use fiscal policy to adjust government spending.
The basic concern of Microeconomics is to keep business firms from losing money to prove that capitalism is better than socialism to study the choices people make to use unlimited resources to produce goods and services to satisfy limited wants Question 2. We use the term macroeconomic externality to describe when what happens at the macro level is different from and inferior to what happens at the micro level.
Imagine that you are sitting at an event with a large audience, like a live concert or a basketball game. A few people decide that they want a better view, and so they stand up. However, when these people stand up, they block the view for other people, and the others need to stand up as well if they wish to see.
Eventually, nearly everyone is standing up, and as a result, no one can see much better than before. The rational decision of some individuals at the micro level—to stand up for a better view—ended up being self-defeating at the macro level.
This is not macroeconomics, but it is an apt analogy. The economy as a whole is massive. There is no one economic indicator that tells the whole story of the economy, so economists look at a variety of indicators some of which include:. The U. Department of Commerce even calculates the Index of Leading Economic Indicators, which is one attempt to combine multiple economic indicators to come up with one number that tries to predict the future path of the economy.
Figure 2. This chart shows what macroeconomics is about. The box on the left indicates a consensus of what are the most important goals for the macro economy, the middle box lists the frameworks economists use to analyze macroeconomic changes such as inflation or recession , and the box on the right indicates the two tools the federal government uses to influence the macro economy.
In thinking about the overall health of the macroeconomy, it is useful to consider three primary goals: economic growth, full employment or low unemployment , and stable prices or low inflation. Economists use theories and models to explain and understand economic principles. In microeconomics, we used the theories of supply and demand; in macroeconomics, we use the theories of aggregate demand AD and aggregate supply AS.
This book presents two perspectives on macroeconomics: the Neoclassical perspective and the Keynesian perspective, each of which has its own version of AD and AS. Between the two perspectives, you will obtain a good understanding of what drives the macroeconomy.
National governments have two sets of tools for influencing the macroeconomy. The first is monetary policy, which involves managing the interest rates and the availability of credit. Each of the items in Figure 2 will be explained in detail in one or more other modules. As you learn these things, you will discover that the goals and the policy tools are in the news almost every day.
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