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Macroeconomics

By Stephen Simpson

In general, e

conomics is the study of how agents (people, firms, nations)
use scarce resources to satisfy unlimited wants. Macroeconomics is the branch
of economics that concerns itself with market systems that
operate on a large scale. Where microeconomics is more
focused on the choices made by individual actors in the economy
(individual consumers or firms, for instance), macroeconomics
deals with the performance, structure and behavior of the
entire economy. When investors talk about macroeconomics,
discussions of policy decisions like raising or lowering
interest rates or changing tax rates are discussed. (For
related reading, see
Understanding Microeconomics.
)

Some of the key questions addressed by macroeconomics include:
What causes unemployment? What causes inflation? What creates or
stimulates economic growth? Macroeconomics attempts to measure
how well an economy is performing, understand how it works, and
how performance can improve.

While the term “macroeconomics” is not all that old (going back
to Ragnar Frisch in
1933) many of the core concepts in macroeconomics have been the
focus of study for much longer. Topics like unemployment,
prices, growth and trade have concerned economists almost from
the very beginning of the discipline, though their study has
become much more focused and specialized through the 1990s and
2000s.

Likewise, it is difficult to name any sort of founder of
macroeconomic studies. John Maynard Keynes is
often credited with the first theories of economics that
described or modeled the behavior of the economy, elements of
earlier work from the likes of Adam Smith and John Stuart Mill clearly
addressed issues that would now be recognized as the domain of
macroeconomics. (For related reading, see
Giants Of Finance: John Maynard Keynes.
)

Although microeconomic ideas like game theory are clearly quite
significant today and the decision-making process of individual
agents like firms is still an important field of study,
macroeconomics has arguably become the dominant focus of
economics – at least as it applies to the investment process
and financial markets.

Macroeconomics:
Schools Of Thought

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