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The following article was published in our article directory on January 18, 2013.
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What is Macroeconomics?

Article Category: Business

Author Name: Karasu Cheremushkin

Macroeconomics is an overall term that refers to the study of very large economies on the national or regional levels, by looking at the movements of major economic indicators and the way they interact with each other. This field of study stands in contrast to microeconomics, which is concerned with understanding the decision making processes of individuals and businesses and how these influence the demand and supply of goods and services in the market. If you would like to go deeper than this simple definition, there are free pdf books that you can download that would give you a more comprehensive overview of the subject matter.

What are some of the major economic indicators that are examined in macroeconomics?

Gross National Product/Gross Domestic Product or GDP. This is the monetary worth of the goods and services that were produced within a country for a certain period. GNP measures GDP plus any income that is earned by residents who are currently living overseas. It is one of the most important economic indicators since it measures the country s economic performance. It is usually issued on a quarterly basis. However, to get a more exact picture of the health of an economy, the macroeconomist does not look at GNP and GDP alone but considers them in the context of other indicators. For example, a high GNP growth rate may mask the fact that the economy is actually in decline due to inflation rates that are outpacing production.

Inflation Rate. Inflation measures the rate at which prices of goods and services are increasing over a certain period and is usually expressed as a percentage. This indicator is important because it is an indicator of purchasing power. The higher the inflation rate, the less an individual can buy with a particular amount of money. However, inflation can also result in an increase in wages. If wages grow more quickly than rising prices the effect of inflation will be offset. Macroeconomists also look at deflation, or the sustained decrease in the prices of goods and services. While this can be good for the consumer, it is bad for the economy as a whole, since profits will decrease causing business owners to shut down their factories and resulting in increased unemployment.

Employment and Unemployment Rates. These indicators measure how much of the total labor force of a country is working and how many are presently seeking employment. These figures are important because unemployed workers have less purchasing power, and this can affect other industries such as the retail sector, and lead to further unemployment. High unemployment levels can also have a negative impact on a country s economic growth rates, causing them to fall.

Balance of Payments. This indicator is considered the balance sheet of the national economy as it looks at a country s trade balance, or how much it earns from exports compared with its payments for imports, as well as other financial transactions. If export earnings surpass import payments, the balance of payments is considered positive and shows that the country is economically stable.

If you would like to learn more about these macroeconomic indicators, you can download free books online on these topics.

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