Introduction to Macroeconomics
Macroeconomics is the study of the performance, structure, behavior, and decision-making of an economy as a whole.
LEARNING OBJECTIVESDefine macroeconomics and identify the main users of macroeconomics.
- The goal of macroeconomics is to study how to maximize national income and national economic growth.
- The most common macroeconomic topics of study are sustainability, full employment, price stability, external balance, equitable distribution of income and wealth, and increasing productivity.
- Macroeconomists create models that address two key areas of research: the causes and consequences of short-run fluctuations in national income (the business cycle) and the determinants of long-run economic growth.
- Macroeconomics The study of the performance, structure, behavior, and decision-making of an economy as a whole, rather than individual markets.
- Inflation An increase in the general price level, or the nominal cost of goods and services and the cost of living.
- Deflation A decrease in the general price level, or the nominal cost of goods and services and the cost of living.
Macroeconomics is the study of the performance, structure, behavior, and decision-making of an economy as a whole. Macroeconomists focus on the national, regional, and global scales. For most macroeconomists, the purpose of this discipline is to maximize national income and provide national economic growth. Economists hope that this growth translates to increased utility and an improved standard of living for the economy's participants. While differences among the objectives of national and international entities exist, most follow the ones detailed below:
Circulation in Macroeconomics
Circulation in Macroeconomics: Macroeconomics studies the performance of national or global economies and the interaction of certain entities at this level.
- Sustainability occurs when an economy achieves a rate of growth that allows an increase in living standards without undue structural and environmental difficulties.
- Full employment occurs when everyone who is willing and able to work is able to get a job. Most economists believe a certain amount of frictional, seasonal, and structural unemployment (the natural rate of unemployment) will always exist. Consequently, full employment does not mean zero unemployment.
- Price stability occurs when prices remain largely stable and the economy does not experience rapid inflation or deflation. Price stability is not necessarily zero inflation; steady levels of low-to-moderate inflation is usually considered ideal.
- External balance occurs when exports roughly equal imports during the long run.
- Equitable distribution of income and wealth among the economy's participants does not income and wealth are the same for everyone.
- Increasing productivity over time throughout the national economy is ideal.
To achieve these goals, macroeconomists develop models that explain the relationship among factors that include national income, output, consumption, unemployment, inflation, savings, investment, and international trade. These models rely on aggregated economic indicators such as gross domestic product (GDP), unemployment, and price indices.
On the national level, macroeconomists hope their models address two key areas of research:
- the causes and consequences of short-run fluctuations in national income, otherwise known as the business cycle, and
- the determinants of long-run economic growth.
Source: Boundless, https://courses.lumenlearning.com/boundless-economics/chapter/differences-between-macroeconomics-and-microeconomics/
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