Macroeconomics is a part of our everyday lives. If the macroeconomy is doing well, few people do not have jobs who want one, people’s incomes are generally rising, and profits of corporations are generally high.
Macroeconomics focuses on the determinants of total national output, whereas microeconomics focuses on the factors that influence the production of particular products and the behavior of individual industries. Macroeconomics is concerned with the sum or aggregate of industries’ performance, including the consumption of all households in the economy, the amount of labor supplied and demanded by all individuals and firms, and the total amount of all goods and services produced.
Introduction to Macroeconomics
Macroeconomics was born out of the effort to explain the Great Depression of the 1930’s. Since that time, the discipline has evolved, concerning itself with new issues as the problems facing the economy have changed. Through the late 1960’s, it was believed that government could “fine-tune” the economy to keep it running on an even keel at all times. The poor economic performance of the 1970’s however, showed that fine-tuning does not always work.
Meaning of Macro Economics
It is the study of economy as a whole. The study of the economy as a whole is carried out by analyzing the behaviour of and interaction between macroeconomics variables including national output (GDP and GNP), aggregate employment, the general price level, aggregate consumption, saving and investment, price level and economics transactions with the rest of the world. Precisely, macroeconomics studies the relationship and interaction between the macroeconomic variables and other internal and external ‘factors or forces’ that determine the level and growth of national output and employment, the general price level and the balance of payments position of an economy.
Macroeconomics seeks to answer the following types of question:
• Which factors and forces determine the GDP and GNP of a country?
• How are GDP and GNP determined and which factors determine growth and depression in the economy?
• How is the aggregate employment determined and what causes unemployment?
• What causes inflation and deflation in a country and how do they affect the economy?
• How do government policies-monetary and fiscal-affect the economy and as well as business activities?
