what is Macro Economics?
Definition: Macroeconomics is the branch of economics that studies the behavior and performance of an economy as a whole. It focuses on the aggregate changes in the economy such as unemployment, growth rate, gross domestic product and inflation.
- Macroeconomics is the branch of economics that deals with the structure, performance, behavior, and decision-making of the whole, or aggregate, economy.
- The two main areas of macroeconomic research are long-term economic growth and shorter-term business cycles.
- Macroeconomics in its modern form is often defined as starting with John Maynard Keynes and his theories about market behavior and governmental policies in the 1930s; several schools of thought have developed since.
- In contrast to macroeconomics, microeconomics is more focused on the influences on and choices made by individual actors in the economy (people, companies, industries, etc.).
Macroeconomists try to forecast economic conditions to help consumers, firms, and governments make better decisions:
- Consumers want to know how easy it will be to find work, how much it will cost to buy goods and services in the market, or how much it may cost to borrow money.
- Businesses use macroeconomic analysis to determine whether expanding production will be welcomed by the market. Will consumers have enough money to buy the products, or will the products sit on shelves and collect dust?
- Governments turn to macroeconomics when budgeting spending, creating taxes, deciding on interest rates, and making policy decisions.
Gross Domestic Product (GDP)
Output, the most important concept of macroeconomics, refers to the total amount of goods and services a country produces, commonly known as the gross domestic product (GDP). This figure is like a snapshot of the economy at a certain point in time. When referring to GDP, macroeconomists tend to use real GDP, which takes inflation into account, as opposed to nominal GDP, which reflects only changes in price. The nominal GDP figure is higher if inflation goes up from year to year, so it is not necessarily indicative of higher output levels, only of higher prices.
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