Economics Definition: American Heritage Dictionary

The study of the overall aspects and workings of a national economy, such as income, output, and the interrelationship among diverse economic sectors.

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Dictionary definition of Macroeconomics The American Heritage® Dictionary of the English Language, Fourth Edition Copyright © 2004, 2000 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved.   More from Dictionary

Macroeconomics: Investopedia

The field of economics that studies the behavior of the aggregate economy. Macroeconomics examines economy-wide phenomena such as changes in unemployment, national income, rate of growth, gross domestic product, inflation and price levels.

Investopedia Says: Macroeconomics is focused on the movement and trends in the economy as a whole, while in microeconomics the focus is placed on factors that affect the decisions made by firms and individuals. The factors that are studied by macro and micro will often influence each other, such as the current level of unemployment in the economy as a whole will affect the supply of workers which an oil company can hire from, for example.

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Macroeconomics : Word Net

Macroeconomics is the branch of economics that studies the overall working of a national economy

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Microeconomics : Barron's Banking Terms

Analysis of a nation's economy as a whole, examining aggregate data, such as inflation, industrial production, price levels, and unemployment. Contrast with microeconomics, the analysis of business sectors and industry groups.

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Bnking Terms information about Macroeconomics. Dictionary of Finance and Investment Terms. Copyright © 2006 by Barron's Educational Series, Inc. All rights reserved.   More from Finance and Investment Terms.

Macroeconomics : Britannica Concise Encyclopedia

Study of the entire economy in terms of the total amount of goods and services produced, total income earned, level of employment of productive resources, and general behaviour of prices. Until the 1930s, most economic analysis focused on specific firms and industries. The aftermath of the Great Depression and the development of national income and production statistics brought new interest to the field of macroeconomics. The goals of macroeconomic policy include economic growth, price stability, and full employment. See also microeconomics; national income accounting.

For more information on macroeconomics, visit Britannica.com.

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Macroeconomics : Houghton Mifflin Company

The part of economic theory that deals with aggregates, such as national income, total employment, and total consumption. (Compare microeconomics.)

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Economics information about Macroeconomics. The New Dictionary of Cultural Literacy, Third Edition Edited by E.D. Hirsch, Jr., Joseph F. Kett, and James Trefil. Copyright © 2002 by Houghton Mifflin Company. Published by Houghton Mifflin. All rights reserved.   More from Economics

Macroeconomics : Wikipedia [Webmaster's Choice]

Macroeconomics is a sub-field of economics that examines the behavior of the economy as a whole, once all of the individual economic decisions of companies and industries have been summed. Economy-wide phenomena considered by macroeconomics include Gross Domestic Product (GDP) and how it is affected by changes in unemployment, national income, rate of growth, and price levels.

In contrast, microeconomics is the study of the economic behaviour and decision-making of individual consumers, firms, and industries.

Macroeconomics can be used to analyze how to influence government policy goals such as economic growth, price stability, full employment and the attainment of a sustainable balance of payments.

Macroeconomics is sometimes used to refer to a general approach to economic reasoning, which includes long term strategies and rational expectations in aggregate behavior.

Origins

Until the 1930s most economic analysis did not separate out individual economics behavior from aggregate behavior. With the Great Depression of the 1930s and the development of the concept of national income and product statistics, the field of macroeconomics began to expand. Particularly influential were the ideas of John Maynard Keynes, who formulated theories to try to explain the Great Depression. Before that time, comprehensive national accounts, as we know them today, did not exist.

One of the challenges of economics has been a struggle to reconcile macroeconomic and microeconomic models. Starting in the 1950s, macroeconomists developed micro-based models of macroeconomic behavior (such as the consumption function). Dutch economist Jan Tinbergen developed the first comprehensive national macroeconomic model, which he first built for the Netherlands and later applied to the United States and the United Kingdom after World War II. The first global macroeconomic model, Wharton Econometric Forecasting Associates LINK project, was initiated by Lawrence Klein and was mentioned in his citation for the Nobel Memorial Prize in Economics in 1980.

Theorists such as Robert Lucas Jr suggested (in the 1970s) that at least some traditional Keynesian (after British economist John Maynard Keynes) macroeconomic models were questionable as they were not derived from assumptions about individual behavior, although it was not clear whether the failures were in microeconomic assumptions or in macroeconomic models. However, New Keynesian macroeconomics has generally presented microeconomic models to shore up their macroeconomic theorizing, and some Keynesians have contested the idea that microeconomic foundations are essential, if the model is analytically useful. An analogy might be that the fact that quantum physics is not fully consistent with relativity theory doesn´t mean that relativity is false. Many important microeconomic assumptions have never been proved, and some have proved wrong.

The various schools of thought are not always in direct competition with one another, even though they sometimes reach differing conclusions. Macroeconomics is an ever evolving area of research. The goal of economic research is not to be "right," but rather to be accurate. It is likely that none of the current schools of economic thought perfectly capture the workings of the economy. They do, however, each contribute a small piece of the overall puzzle. As one learns more about each school of thought, it is possible to combine aspects of each in order to reach an informed synthesis.

Analytical approaches

The traditional distinction is between two different approaches to economics: Keynesian economics, focusing on demand; and supply-side (or neo-classical) economics, focusing on supply. Neither view is typically endorsed to the complete exclusion of the other, but most schools do tend clearly to emphasize one or the other as a theoretical foundation.

• Keynesian economics focuses on aggregate demand to explain levels of unemployment and the business cycle. That is, business cycle fluctuations should be reduced through fiscal policy (the government spends more or less depending on the situation) and monetary policy. Early Keynesian macroeconomics was "activist," calling for regular use of policy to stabilize the capitalist economy, while some Keynesians called for the use of incomes policies.

• Supply-side economics delineates quite clearly the roles of monetary policy and fiscal policy. The focus for monetary policy should be purely on the price of money as determined by the supply of money and the demand for money. It advocates a monetary policy that directly targets the value of money and does not target interest rates at all. Typically the value of money is measured by reference to gold or some other reference. The focus of fiscal policy is to raise revenue for worthy government investments with a clear recognition of the impact that taxation has on domestic trade. It places heavy emphasis on Say's law, which states that recessions do not occur because of failure in demand or lack of money.

Schools

• Monetarism, led by Milton Friedman, which holds that inflation is always and everywhere a monetary phenomenon. It rejects fiscal policy because it leads to "crowding out" of the private sector. Further, it does not wish to combat inflation or deflation by means of active demand management as in Keynesian economics, but by means of monetary policy rules, such as keeping the rate of growth of the money supply constant over time.

• New Keynesian economics, which developed partly in response to new classical economics, strives to provide microeconomic foundations to Keynesian economics by showing how imperfect markets can justify demand management.

• Austrian economics is a laissez-faire school of macroeconomics. It focuses on the business cycle that arises from government or central-bank interference that leads to deviations from the natural rate of interest, and emphasizes the importance of credit and investment misallocation in business cycle fluctuations.

• Post-Keynesian economics represents a dissent from mainstream Keynesian economics, emphasizing the role of uncertainty and the historical process in macroeconomics.

• New classical economics. The original theoretical impetus was the charge that Keynesian economics lacks microeconomic foundations -- i.e. its assertions are not founded in basic economic theory. This school emerged during the 1970s. This school asserts that it does not make sense to claim that the economy at any time might be "out-of-equilibrium". Fluctuations in aggregate variables follow from the individuals in the society continuously re-optimizing as new information on the state of the world is revealed. Later yielded an explicit school which argued that macro-economics does not have micro-economic foundations, but is instead the tool of studying economic systems at equilibrium.

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