Macroeconomics studies national or regional economies as a whole, focusing on large-scale indicators and building models to explain relationships. It became a viable area of study in the 1930s due to the Great Depression, with John Maynard Keynes’ theories dominating until recently. No economic model fully reproduces how an economy works, but the study of macroeconomics has led to the use of government policies to effect economic change. Fiscal and monetary policies are the key tools used to manage national economies.
The field of economics known as macroeconomics focuses on the behaviors of a national economy or a regional economy as a whole. Macroeconomics is a very general field that is primarily concerned with large-scale indicators, such as unemployment rates, and with building models intended to explain the relationships between those indicators. It is also considered to complement microeconomics, which studies the actions of individuals rather than larger scales.
Macroeconomics became a viable area of economic study in the 1930s as a direct result of the Great Depression. Until that time, economists did not consider individual activities from the behavior of a national economy as a whole. John Maynard Keynes, a British economist, and other economists who worked to explain the causes of the Great Depression were particularly influential in the development of macroeconomics.
Keynes’ theories have dominated the field until recently. Keynesians relied on aggregate demand to answer central questions of macroeconomics, such as how to explain unemployment levels. In the late 1980s, Keynesian economists reconciled with classical economists, a significant struggle in which economists worked to reconcile microeconomic models with those developed in macroeconomics. While Keynesian models are no longer the basis of the field, current models are heavily influenced by their Keynesian predecessors. So far, no school of economic thought has developed a model that fully and accurately reproduces how an economy works, leading to disparate conclusions. However, considering each other’s theories can allow an economist to develop an operational approach to the field.
The study of macroeconomics has led to the use of government policies to effect economic change, with the hope of avoiding depressions and other economic shocks. The two key tools used to manage national economies are fiscal and monetary policies. The policies developed by this field of economics have broad effects: as a rule, it is the policies that make the evening news.
Protect your devices with Threat Protection by NordVPN
