Meaning of Macroeconomics

Introduction

Macroeconomics refers to the study of aggregate indicators of an economy on a national or state level. The macroeconomics definition can best be explained as the study of an economy in terms that are calculated on a large level. These Terms include several indicators such as GDP, price indices and unemployment rates. 

The terms could also concern consumption and output. For example, the total income earned or the total goods or services produced. It could also be the total amount of income earned or the total value of goods or services produced as a nation. 

Origin and the Meaning of Macroeconomics

The term “macroeconomics” derives from the Greek word “makro”. The word “makro” means large and, in this sense, is being used to refer to the fact that macroeconomics is the science of evaluating large macro that is only seen on the national or state level. 

In 1963, renowned British economist Mr. J.M. Keynes introduced modern macroeconomics through his theory published in his book called the General Theory of Employment, Interest, and Money. This theory gave rise to the Keynesian school of thought, which challenges classical assumptions in macroeconomics that have been around since 1930 during the Great Depression. 

Today, modern macroeconomics addresses the following two important concerns:

• The necessary regulatory incentives can help develop a nations’ economy. 
• The input of consumer demand and trade in the development of economy 

Important Terms in Macroeconomics

To understand macroeconomics, we need to understand certain macroeconomics definitions and terms. The important terms in Macroeconomics are as follows:

• Indicators

The term indicators are the macroeconomics definition for quantifiable aggregate quantities that help analyse the state of the economy. Several indicators can be used, such as the Gross Domestic Product (GDP), rates of unemployment in a nation, and price indices. 

These indicators help understand the relationship between multiple factors that affect the study of macroeconomics. These factors include output, consumption, national income, unemployment, savings, investment, inflation, international trade, and government spending. All in all, these variables are grouped and called economic indicators used in the study of macroeconomics. 

• Economic Agents

An economic agent is a macroeconomics definition that categorises the entities that affect economic decisions on a national level. These economic decisions are then used as quantifiable indicators of values while studying macroeconomics and the state of a nation’s economy. These agents can be both individuals and institutions responsible for making big economic decisions that affect the economy on a large scale. 

• Monetary Policy 

Macroeconomics is often implemented through policies. One such policy is the Monetary policy. It is a policy implemented by changing the circulating money supply or revising the interest rates. Since this policy relates to the flow of money in an economy, it is enacted by the central bank of the nation. In the United States of America, this is the Federal Reserve. In India, this is the responsibility of the Reserve Bank of India (RBI). The objective of the monetary policy is to stimulate the economy. Thus the policy uses measures such as decreasing interest rates on loans and increasing the money in circulation. 

• Fiscal Policy

In contrast to the monetary policy, the Fiscal policy of a nation is implemented and regulated through legislation. Thus, the government is the primary authority for implementing this policy. The two major tools of a nation’s Fiscal Policy are government spending and tax regime. The fiscal policy is made after using macroeconomic indicators to analyse the nation’s growth. 

If the country requires a boost, the government increases spending and decreases taxes. In a situation of surplus, a government can choose to decrease spending or divert it. One of the most acknowledged flaws in the implementation of the fiscal policy is that there is a huge time delay in its formulation and implementation.   

Importance of Macroeconomics

Macroeconomics is an important subset of economics. Macroeconomics plays an important role in the progress of a nation. It can be concluded that policy players such as governments and banks can use it to achieve certain goals. Here are some of the objectives and results of the implementation of macroeconomic policies

• Macroeconomics can help understand and analyse the inner functionings of a modern economic system. Macroeconomics can describe how an economy functions and how levels of national income and employment can be determined through aggregate demand and aggregate supply.
• Macroeconomics can help achieve any goal, such as economic growth, a high GDP level, or even an increase in employment. Since it analyses the forces affecting economic growth in a nation, macroeconomics can explain how a nation can increase economic growth and sustain it.
• Macroeconomics can elaborate on factors that determine the balance of payments. Additionally, Macroeconomics helps analyse the reason for a deficit in the balance of payments and can suggest the required remedial measures.

Conclusion

It can be concluded that macroeconomics is an important subset of economics that is responsible for analysis and study regarding the growth of a nation or an economy. Macroeconomics consists of two parts. The first is evaluative methods that analyse a nation’s current economic state by evaluating indicators such as Gross Domestic Product (GDP), rates of unemployment in a nation, and price indices. The second part is the theory of macroeconomics that dictates policies that can be used to improve the economic status of a nation. Some examples of this theory are the monetary and fiscal policies that nations implement.