Macroeconomics - Explained
What is Macroeconomics?
Written by J. Mance Gordon
Updated at April 23rd, 2024
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What is Macroeconomics?
Macroeconomics is a field of economics that studies how market forces, such as unemployment rates, interest rates, inflation, government spending, and international trade, influence one or more nations' economy.
What are the Goals of Macroeconomics?
In thinking about the macroeconomy's overall health, it is useful to consider three primary goals:
- economic growth,
- low unemployment, and
- low inflation.
Why is Economic Growth important in Macroeconomics?
Economic growth affects the standard of living in a country. Economists measure growth by the percentage change in real (inflation-adjusted) gross domestic product. A growth rate of more than 3% is considered good.
Why is Unemployment important in Macroeconomics?
Unemployment or the unemployment rate is the percentage of people in the labor force who do not have a job. When people lack jobs, the economy is wasting a precious resource-labor, and the result is lower goods and services produced.
Why is Inflation important in Macroeconomics?
Inflation is a sustained increase in the overall level of prices, and is measured by the consumer price index. If many people face a situation where the prices that they pay for food, shelter, and healthcare are rising much faster than the wages they receive for their labor, there will be widespread unhappiness as their standard of living declines. For that reason, low inflation—an inflation rate of 1–2%—is a major goal.
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