Contact Us

If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

  • Courses
  • Find a Job
  • Tutoring
  • Home
  • Economics, Finance, & Analytics
  • Economic Analysis & Monetary Policy

Macroeconomic Externality

What is a Macroeconomic Externality?

Written by Jason Gordon

Updated at March 28th, 2023

Contact Us

If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

  • Marketing, Advertising, Sales & PR
    Principles of Marketing Sales Advertising Public Relations SEO, Social Media, Direct Marketing
  • Accounting, Taxation, and Reporting
    Managerial & Financial Accounting & Reporting Business Taxation
  • Professionalism & Career Development
  • Law, Transactions, & Risk Management
    Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
  • Business Management & Operations
    Operations, Project, & Supply Chain Management Strategy, Entrepreneurship, & Innovation Business Ethics & Social Responsibility Global Business, International Law & Relations Business Communications & Negotiation Management, Leadership, & Organizational Behavior
  • Economics, Finance, & Analytics
    Economic Analysis & Monetary Policy Research, Quantitative Analysis, & Decision Science Investments, Trading, and Financial Markets Banking, Lending, and Credit Industry Business Finance, Personal Finance, and Valuation Principles
  • Courses
+ More

What is a Macroeconomic Externality? 

A macroeconomic externality is where what happens at the macro level is different from and inferior to what happens at the micro level. For example, a firm should respond to a decrease in demand for its product by cutting its price to increase sales. However, if all firms experience a decrease in demand for their products, sticky prices in the aggregate prevent aggregate demand from rebounding (which we would show as a movement along the AD curve in response to a lower price level).

Back to: ECONOMIC ANALYSIS & MONETARY POLICY

Related Topics

  • Keynesian Perspective of Aggregate Demand
  • Recessionary and Inflationary Gap
  • Consumption Expenditure
  • Investment Expenditure
  • Government Spending in Aggregate Demand
  • Net Exports in Aggregate Demand
  • Keynesian Economic Analysis
  • Wage and Price Stickiness 
  • Coordination Argument of Wage Stickiness
  • What are Menu Costs
  • Keynesian Assumptions in the Aggregate Demand and Aggregate Supply Model
  • Macroeconomic Externality
  • Expenditure Multiplier
  • The Phillips Curve
  • Keynesian Approach to Unemployment and Inflation
  • Keynesian Perspective on Market Forces
  • NeoClassical Economics
  • Long Run Potential GDP
  • Physical Capital Affects Productivity
  • Potential GDP in the Aggregate Demand Aggregate Supply Model
  • Prices are Flexible in the Long Run
  • Keynesian and NeoClassical View of Long-Run Aggregate Supply and Demand
  • Speed of Macroeconomic Adjustment of Wages and Prices
  • Paradox of Rationality
  • Rational Expectations Theory
  • Shapley Value
  • Mechanism Design Theory
  • What is the Adaptive Expectations Theory
  • Measure Inflation Expectations
  • Neoclassical Phillips Curve Tradeoff
  • Neoclassical View of Unemployment
  • Neoclassical View of Recessions
  • Keynesian vs Neoclassical Macroeconomic Policy Recommendations
macroeconomic externality economic externality

Was this article helpful?

Yes
No

Related Articles

  • Input-Output Analysis - Explained
  • Tracking Real GDP
  • Aggregate Supply and Demand - Macro vs Microeconomics
  • Monopolistic Competition and Efficiency



©2011-2023. The Business Professor, LLC.
  • Privacy

  • Questions

Definition by Author

0
0
Expand