Macroeconomics is defined as the area of economic theory that studies processes occurring at the level of the national economy as a whole

Macroeconomics is defined as the area of economic theory that studies the performance, structure, behavior and decision-making of the economy as a whole and not its individual regions, segments or markets, study at the micro level. It considers national, regional and global aspect. Micro and macroeconomics are the two main approaches to the study of the economy.

Definition

Macroeconomics (the prefix "macro" in Greek means “large”) study aggregated indicators such as gross domestic product, unemployment rate, price indices and relationships between different sectors of the economy. Its main goal – to find the answer to the question about how everything works. Macroeconomists are engaged in the construction of models that explain the relationship between such indicators as production, national income, inflation, unemployment, savings, consumption, investment, international trade and Finance. If at the micro level, researchers are investigating primarily the actions of individual agents and individual markets, the economy considered as a system in which all elements are interrelated and affect the success or failure.

Subject matter

This is a very wide area. However, we can say that macroeconomics is defined as the area of economic theory that studies two main aspects:

• Causes and consequences of fluctuations in national income in the short term. That is the business cycle.
• Determinants of long-term economic growth. In fact, the national income.

Macroeconomic models and implemented them with the help of projections are used by national governments for the development and assessment of its own monetary and fiscal policy.

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Basic concepts

Macro Economics is defined as the area of economic theory that studies the national economy as a whole. There is therefore nothing surprising in the fact that it covers a variety of concepts and variables. However, there are three main topics for macroeconomic research. The theory can be associated with the production, unemployment and inflation. These topics are important for all economic agents, not only for researchers.

Production

National income is the aggregate of the total volume that produces the state for a certain period of time. Since macroeconomics is defined as the area of economic theory that studies the national economy as a whole, it is important to assess the production not only in natural but also in terms of value. Production and income are often considered to be equivalents. They are usually expressed through the gross domestic product or one of the indicators of the system of national accounts. Researchers who are engaged in a long-term perspective, the changes in output study economic growth. The last is influenced by such factors as improvement of technology, the accumulation of equipment and other capital resources, the improvement of education. Business cycles can cause short-term setbacks in production, that is, the so-called recession. National policy should focus on prevention and acceleration of economic growth.

Unemployment

Macro Economics is defined as the area of economic theory which, as mentioned above, considering three main topics. Unemployment – is one of them. Its level is measured by the percentage of the unemployed population. This percentage does not include people of retirement age and students. There are several types of unemployment:

• Classic. Occurs when established in the labour market wages are too high, so companies are not willing to hire additional staff.
• Friction. This type of unemployment comes from the fact that the search for a new job - even when there are suitable vacancies.
• Structural. Covers a whole lot of subtypes that are associated with changes in the economy. In this case there is a mismatch between the available people and skills that are required for employment. This problem often arises in connection with the possibility of robotization and computerization of the economy.
• Cyclic. Okun's law says about the empirical relationship between economic growth and unemployment. A three percent increase in production leads to increase in employment by 1 %. However, you need to understand that rising unemployment is inevitable during a recession.

Inflation

Macroeconomics is defined not only through the production and the number trudoustroeno workforce. Importantly, the behavior of the prices of goods from the consumer basket. These changes are measured using special indexes. Inflation occurs when the national economy "overheat" the growth starts to happen too quickly. In this case, macroeconomics is defined as the area of economic theory that studies howby the way, you can control the money supply and avoid price hike. On the basis of its findings is the state of monetary and fiscal policy. For example, to reduce inflation can increase interest rates or reduce the money supply. The lack of any effective action by the Central Bank may lead to uncertainty in society and other negative consequences. However, you need to understand that deflation can lead to a reduction in production. It is therefore important to stabilize prices, not allowing them to over-ranging of any of the parties.

Macroeconomic models

In order to clearly explain how the global and national economy, used graphics. Macroeconomics is defined as the area of economic science that studies the three main types of models:

1. AD-AS. The model of aggregate demand and supply considering the balance both in the short and in the long term.
2. Is-LM. Schedule of investments-savings – a combination of equilibrium in monetary and commodity markets.
3. Growth Model. For example, the theory of Robert Solow.

Monetary and fiscal policy

Often, macroeconomics is defined as the area of the theory, insights and forecasts which can easily be put into practice. And indeed it is. To stabilize the economy is often used monetary and fiscal policy. The main goal of these approaches is to achieve GDP growth at the expense of more full employment.

Monetary policy is conducted by Central banks and connected with the controlling the money supply through several mechanisms. For example, the government may issue cash for the purchase of bonds or other assets. This will reduce the interest rate. Monetary policy can be ineffective because of the liquidity trap. If inflation and interest rates close to zero, the traditional measures no longer work. In this case, it may help, for example, quantitative easing.

Fiscal policy involves using government revenue and expenditure to influence the economy. Suppose in the national economy there is a lack of capacity utilization. The government can increase their spending, to connect the multiplier effect, we will be able to observe the growth of output of goods and services.

History and theory

Macro Economics is defined as the industry that emerged from the arguments about business cycles. The quantity theory of money was very popular before the Second world war. One of its versions belonged to Irving Fisher. He formulated the famous equation: M (the money supply) * V (velocity) = P (price level) *Q (output). Ludwig von Mises, the Austrian school, in 1912 published a paper in which was first lit macroeconomic topics. Formed theory after the great depression. In the form of modern macroeconomics started with the publication of the work of John Maynard Keynes "the General theory of employment, interest and money”. Further study of the economy as a whole was engaged representatives from all areas, in particular the monetarists and neo-classical.