Macroeconomics

Macroeconomics analyzes the economy-wide phenomena by examining aggregate indicators and the interrelationships among different sectors of the economy, providing insights into overall economic health and trends.

Core indicators include Gross Domestic Product (GDP), inflation rate, unemployment rate, trade balances, interest rates, and consumer confidence indices. These metrics help assess economic performance and guide policy.

Aggregate demand represents total spending by households, businesses, government, and foreign buyers. Aggregate supply reflects the total output firms are willing to produce at various price levels. Their interaction determines equilibrium output and price levels.

Fiscal policy involves government decisions on taxation and public spending aimed at influencing economic activity, stabilizing growth, and redistributing resources.

Monetary policy is conducted by central banks through tools such as interest rate adjustments, open market operations, and reserve requirements to control money supply, inflation, and economic growth.

Inflation is the sustained increase in the general price level, eroding purchasing power. Deflation denotes a decline in prices, potentially leading to reduced spending and economic contraction.

Macroeconomics studies different types of unemployment—frictional, structural, cyclical—and their effects on economic output and social welfare.

Long-term increases in productive capacity and standards of living are studied through growth theories, technological innovation, capital accumulation, and institutional factors.

Business cycles describe fluctuations in economic activity, characterized by expansions, peaks, recessions, and recoveries, driven by complex internal and external forces.

This area examines trade balances, exchange rates, capital flows, and the global impact of domestic economic policies within the interconnected world economy.

Various models—classical, Keynesian, monetarist, new classical, and real business cycle—offer frameworks for understanding economic phenomena and policy implications.

Modern macroeconomics grapples with challenges such as globalization effects, inequality, climate change economics, financial crises, and the integration of digital economies.