Principles of Macroeconomics

The study of whole economic systems, aggregating over the functioning of individual players within them. More specifically, it is usually the study of national economies and the determination of national income, economic growth, the balance of payments, and the exchange rate. It is distinct from microeconomics, which looks at understanding the decisions of individual agents. In classical macroeconomics lay a presumption of the efficiency and effectiveness of free markets, and all macroeconomic variables were seen as the sum of the variables as they applied to individual firms or consumers. Macroeconomic mechanisms were largely embedded in macroeconomics.

Since the time of John Maynard Keynes, however, economists have allowed for disequilibrium in macro-economic variables and therefore the macroeconomy can almost follow a life of its own. For example, individual households may choose to save and we may understand the motivation of that saving with a microeconomic analysis, but if all households choose to save too much at the same time, the economy can dive into recession — a topic for the macroeconomist.

For many businesses, macroeconomics has one dimension: forecasting the path the economy will follow, as that can be such an important factor in determining the right level of prices, output and investment. quantity theory of money.

From CREDO Macroeconomics: The New Penguin Dictionary