In contrast to microeconomics, macroeconomics studies economy-wide phenomena such as inflation, unemployment, and economic growth. It attempts to explain how economic changes affect households, firms, and markets simultaneously.
How do we measure the performance of an economy? Two measures that come to mind are per capita income and life expectancy.
The main actors in any economy are consumers, workers, and employers. Each person is a consumer and furthermore, they may be a worker or an employer.
In addition to the 7 principles we studied at the beginning of microeconomics, there are 3 that are relevant to macroeconomics.
A country’s standard of living depends on its ability to produce goods and services.
Productivity is the amount of goods and services produced from each hour of a worker’s time.
Prices rise when the government prints too much money.
Inflation is an increase in the overall level of prices in the economy. In the long run, the growth in quantity of money causes inflation. The value of the money falls.
Society faces a short-run trade-off between inflation and unemployment.
This is shown in the Phillips curve (which we shall not study).
Macroeconomics is the analysis of the backdrop of economic conditions against which firms/consumers make decisions.
The measures we use are per capita income and life expectancy. It is seen that both of them vary very widely across countries. We also sometimes use the total market value of a nation’s production - its Gross Domestic Product (GDP).
What makes countries that contribute more to the global economy different?