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Definition of Macroeconomics:
is the study of national and global economies and how they are affected by large-scale choices and public policies.
Macroeconomics examines the aggregate economy by studying changes in gross domestic product, inflation, interest rates, unemployment, the rate of economic growth, and international trade. Governments may use monetary and fiscal policies to manage the economy by controlling economic growth and price-levels. Monetary policy relates to controlling the money supply, which affects interest rates and inflation. Should the Federal Reserve increase the money supply in an effort to stimulate the economy at the risk of increasing inflation? Fiscal policy involves taxation and spending. Should the government increase spending? How should the government spend its tax revenue? Should the government raise taxes to pay for its programs? How should a tax be structured? Most economists agree that the United States must reduce its deficit (the difference between spending and tax revenues). They believe the total spending on health care, social services, and military spending is too high. Knowing that spending is too high is easy. Reaching a consensus is the greater challenge because different ideologies influence our politicians’ views of what services should be cut. Understanding macroeconomic theory assists us in analyzing our politician's proposals and voting more responsibly.
Dig Deeper With These Free Lessons:
Opportunity Cost - The Cost Of Every Decision
Production Possibility Frontier
Circular Flow Model - We Depend On Each Other
Gross Domestic Product - Measuring an Economy's Performance