We explain what macroeconomics is and the variables it studies. In addition, the origin of the macroeconomic approach and the issues it covers.
What is macroeconomics?
Macroeconomics is an approach to economic theory that studies the global indicators of the economic process , emphasizing global variables such as:
- Total amount of goods and services produced.
- Total revenue .
- Total level of employment.
- Level of productive resources.
- Balance of payments level.
- Exchange rate.
- General behavior of prices.
That is, it is a comprehensive approach to the economy, contrary to the individual approach by economic agent proposed by the microeconomics .
Macroeconomics sets its interest in local, regional or global economies , paying special attention to indicators of high political impact and in everyday life, which allows us to understand the complex phenomena of economic and financial stability that intervene in the region.
For this, the macroeconomic approach uses measurements, statistics, and macromagnitudes that offer a general approach to various economic segments, such as the Gross Domestic Product (GDP), the Interest Rate or the Unemployment Rate.
The origin of this particular approach can be traced until 1936, the year in which the British John Keynes publishes his General Theory of employment, interest and money , a fundamental work in the history of the Western economy , as it contained an explanation of the so-called Great Depression of the 1920s.
The virtue of Keynes’ study, beyond that, was to break with the tradition of previous economists who accepted economic cycles as inevitable. According to him, fiscal and monetary policy could be used as tools to combat unemployment, thus generating a rise in production and tackling economic collapse. From then on, macroeconomics was considered a vital tool in the conduct of the destiny of nations .
Macroeconomics focuses its interest on a set of central issues for the economic performance of a region, of which the following stand out:
- Economic growth . The analysis and control of the factors that allow to increase in the long term the production, the income or the economic indicators of a given region.
- Labor market and unemployment . Unemployment is one of the main concerns of this branch of the economy, so it requires adequate strategies to measure and understand the phenomenon, in order to properly tackle it.
- International economy . The globalization and Capital international financial economies have woven the world so that today few economic phenomena lack of impact on their neighbors and economic partners. In that sense, the study of different international approaches to the economy, such as protectionism or exchange rates, is required.
- Monetary policy . Money control instruments are the main tools with which a country or a coalition of governments can face the macroeconomic issue to influence production and employment.