Macro-economic policy

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DEFINITION

Macro-economic policy / macroeconomics

is concerned with the total (aggregate) scenario of economic issues that determine a person's economic well-being as well as that of one's family and everyone s/he knows.  

These issues involve the overall economic performance of the nation, rather than that of particular individuals.

  1. Do citizens find it easy or difficult to find jobs?  (Unemployment rate)

  2. On average are prices rising rapidly, slowly, or not at all? (Concept of inflation)

  3. How much total income is the nation producing, and how rapidly is total income growing year after year?  (Productivity)

  4. Is interest rate charged to borrow money high or low?

  5. Is the Government spending more than it collects in tax revenue?  (Government budget)

  6. Is the nation as a whole accumulating assets in other countries or is it becoming more indebted to them? (Foreign trade deficit)

Each of the above questions involve a central macroeconomic concept that affect the factors of production – land, labour, capital and entrepreneurship.

The basic task of macroeconomics is to study the behaviour of the policy objectives, namely economic growth, inflation, unemployment and balance of payments and why each matter to individuals and what the government can do (if anything) to improve macroeconomic performance.

The study of economics can be divided into two:

  • Macroeconomics 

    considers aggregate behaviour, and the study of the sum of individual economic decisions.

  • Microeconomics 

    is the study of the economic behaviour of individual consumers, firms and industries.

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