Macroeconomics A General Overview

Macroeconomics deals with the economics of large structures or institutions such as nations or regions. It is one of the two most general fields in economics, the other being microeconomics, which deals with the behavior of individuals and consumers and how these behaviors affect the market in terms of prices and quantities. Indicators commonly studied in macroeconomics include GDP, unemployement rates and price indices. Trade relations with other countries are also important components in macroeconomics. The study of macroeconomics aids in the formulation of economic models which are then used in the formulation of economic policies and business strategies by nations and large corporations.

The word ‘macroeconomics’ was first used by economist Ragnar Frisch in 1933. The field began to expand during this time, especially with the occurrence of the Great Depression which placed the issues of national income and product statistics into the forefront of the government agenda. Various macroeconomic models were soon proposed by economist as the years went by. The first macroeconomic model was proposed by Jan Tinbergen, while the first global macroeconomics model, the Wharton Economic Forecasting Associates LINK project, was created by Lawrence Klein.

Analytical approaches utilized in macroeconomics include the Keynesian approach, which was heavily influenced by economist John Maynard Keynes, an economist who worked to explain the Great Depression. The Keynesian approach focuses on aggregate demand to explain changes in the business cycle. The other approach is neoclassical economics, which places more importance on monetary policy such as the supply of money and interest rates.