Dive Deeper into the Complexities of Macroeconomics

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Economics, including macroeconomics and microeconomics, is similar to a social science, based on the study of how individuals make choices. Economists calculate these decisions to help create economic models to gauge the health of the economy as a whole.

Being able to somewhat accurately predict what will happen in a dynamic economy is important for the wellbeing of a country, and the world. Especially since most economies intertwine with one another. Trying to figure out how to accomplish sustainable growth to foster a healthy economy varies between economists and government leaders.

Macroeconomic research is important because it takes raw data into consideration to help make decisions about future economic developments. Economics uses macroeconomics often in studies today. Also, that isn’t likely to change any time soon. To help introduce the topic, we need to take a closer look at macroeconomics and why it matters.

What Is Macroeconomics?

Before diving into macroeconomics, it’s helpful to define the term. Here is how Investopedia defines the term:

“Macroeconomics is a branch of economics that studies how an overall economy—the market or other systems that operate on a large scale—behaves. Macroeconomics studies economy-wide phenomena such as inflation, price levels, rate of economic growth, national income, gross domestic product (GDP), and changes in unemployment.”

So, macroeconomics studies topics such as inflation, demand, growth, inflation, trade balance, and employment. Thus, factors under the microscope include national income, price of goods, and unemployment levels. Macroeconomics is practical because it involves parts of daily life and touches almost every aspect of a resident’s life.


Why Does Macroeconomics Matter?

Macroeconomics helps understand current trends driving an economy forward while being able to analyze its overall health at the time.

A macroeconomist studies many areas. For instance, successful business cycles, prices determination, rate of inflation (and what determines it), productivity growth, and how a government helps determine the pace of growth. All of these issues are important to help identify a society’s economic activity.

What level of goods and services can a nation produce? How many jobs are available for workers? The trends that cause an economy to slow or accelerate? These are just a few of the questions that help determine success of an economy in macroeconomics.

Investors tend to focus more on microeconomics because of its ability to observe competitive pressures and governmental regulatory changes. The study of microeconomics focuses on individuals, households, and businesses helping contribute to the economy on a much more condensed scale.

To put it simply, both microeconomics and macroeconomics study the overall health of a nation’s economy. However, macroeconomics does have its own faults. These can’t be forgotten when discussing economics research. Studying what is happening at the individual level doesn’t directly translate to what is happening to the economy as a whole. Unfortunately, macroeconomics sometimes ignores market failures, along with an inability to predict a crisis.

Macroeconomics looks at things at a high level. However ironically enough, it misses key statistics to analyze that microeconomics is able to pick up. Too much generalization is a common fault of macroeconomics.

Also, aggregated data might not always hold strong significance based on individual data when it has varying units of measurement. Furthermore, collected individual data, if it doesn’t hold similar composition, leads to unhelpful aggregated value.

Study of Macroeconomics in Today’s World

It’s no secret that the COVID-19 pandemic has had a massive crippling effect on global economies. For example, interrupted manufacturing, small businesses shut down, and many citizens furloughed or fired from their jobs. US President Joe Biden has a $1.9 trillion COVID-19 relief package. It includes giving $750 billion for vaccinations, $600 billion to US families, $400 billion to vulnerable households, and $150 billion to businesses.

Due to this stimulus package, cumulative real gross domestic product (GDP) between 2020 and 2023 should close the gap to the pre-pandemic level, according to analysts.

In addition, macroeconomics helps economists understand inflation and deflation, and its effects on the business market. Currency value change has varying levels of impact on different populations. This allows for different movements to be made based on those changes.

Final Thoughts

The study of macroeconomics is important because it helps analyze the complexities of a country’s economic ability as a whole. Even though macroeconomics does have some pitfalls, macroeconomics research is still required to understand the economy completely. It should never be overlooked.

Macroeconomics has both pros and cons. However, its ability to study, and later influence, the entire economy’s performance must be appreciated. Economists can glance at the whole picture. Thus, see how the money supply affects the changes of the world around us all.