What Are Macroeconomics?

Macroeconomics is the study of broad based economic forces with the intent of that study being facilitation of economic management. The big economic picture is the focus of macroeconomics, which is a branch of economic study. Macroeconomics like economics in general is not an exact science but aims to predict, understand and improve national economic activity through formulaic, demographic, monetary and econometric research and modeling.

Major areas of macroeconomics

To better understand how macroeconomics works it can be divided into sub-categories or areas of focus. Those sub-categories include different types of analysis, methods of intervention, and economic relationships. A few such categories of macroeconomic study are outlined as follows:

i) Fiscal and Monetary Policy:

Monetary and fiscal policy are different forms of Government intervention designed to influence economic stability and growth. The former is managed by the U.S. Federal Reserve in the United States and does so largely by controlling money supply and lending interest rates. The latter utilizes legislation, and the legislative budget to help accomplish its economic goals. The study of historical impacts of governmental policies on the economy is often included in macroeconomic research.

ii) Econometrics:

Econometrics is a conjunctive term meaning it combines two words to form one. In this case those two terms are Economy and Metrics meaning measurement of economy. Thus econometrics theoretically includes any type of measurement system or mechanism. For example, statistical analysis of national economic data, mathematical formulas that depict economic relationships, and graphical representation of economic information that include numerical and geometric data can all be considered within the realm of econometrics.

iii) National Cash Flow:

Cash flow is important because it not only demonstrates where money is going at the national level but also helps determine what the effects of that cash flow will be and if the cash flow is beneficial to an economy. Examples of cash flow items are the total amount of money supply in terms of hard and electronic currency, and credit within an economy. Additionally, cash flow also takes into account national financial accounting such as movement of capital in and out of a country, government expenditures and receipts, national financing, turn key investments, foreign direct investment, investment in research and development, net cash flow in and out of securities markets and total state budgets etc.

iv) International Trade:

As the World becomes ever more globalized, the affect of international trade becomes an evermore relevant aspect of macroeconomic study. The reason this is so as foreign investments and trade account for significant portions of jobs, financing, economic development and competition. As trade barriers lower, and trade agreements are made, the presence of international firms and investors increases and therefore influences macroeconomic performance. Thus international trade is a relevant aspect of macroeconomics because it studies the big i.e. national economic picture in terms of world economic forces.

Macroeconomic indicators

Since macroeconomics is all about large scale economics, any amassed national data such as information collected from the United States Census, Federal Reserve and Department of Commerce may be considered important to macroeconomic analysis. A few macroeconomic indicators that are often used are listed below:

• International Balance of Payments
• National consumer spending
• Gross Domestic Product (GDP) and National Purchasing Power Parity (PPP)
• Inflation, Deflation, or Stagflation
• Employment and Unemployment Statistics
• Trade Deficit

Famous macro-economists

Many if not most economists are versed in more than one area of economics such as microeconomics, and macroeconomics and often specialize in specific areas of economics. An example of an economic specialization would be statistical measurement of fiscal intervention on job growth and many such specializations exist in the World today. A few well known American Economists who are noted for their macroeconomic expertise are the following:

• John Maynard Keynes (Highly Influential 20th century Economist who advocated Government intervention in economic regulation)
• Milton Friedman (20th century conservative economist and Noble Prize recipient)

• Alan Greenspan (Former Chairman of the U.S. Federal Reserve)
• Ben Bernanke (Successor Chairman of the U.S. Federal Reserve)

Summary

To restate the main points of the above paragraphs, macroeconomics studies large scale economic trends, influences and relationships. Macroeconomics utilizes various forms of investigation to analyze large economic forces. Some of those investigatory tools include econometric analysis, the study of fiscal and monetary policy, and national accounting or macro-accounting. Macroeconomics achieved great momentum in the 20th century and can now be considered a necessary area of study in global and national economic development. For this reason macroeconomic indicators, and the knowledge and/or decisions of well known economists are closely monitored.

Sources:

1. http://www.businessdictionary.com/definition/macroeconomics.html
2. http://www.newyorkfed.org/aboutthefed/fedpoint/fed40.html
3. http://welkerswikinomics.wetpaint.com/page/AP+Macroeconomics:+Course+Syllabus?t=anon
4. http://faculty.etsu.edu/hipples/FPvsMP.htm
5. http://fx.sauder.ubc.ca/PPP.html
6. http://en.wikipedia.org/wiki/Macroeconomics