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The three central macroeconomic variables are output, unemployment, and inflation; GDP measures national production, while the GDP deflator separates changes in prices from changes in real output.
Macroeconomics is the study of the performance, structure, behavior, and decision-making of an economy as a whole, including regional, national, and global economies. It examines aggregate measures such as gross domestic product (GDP), national income, unemployment, inflation, consumption, saving, investment, trade, and long-term economic growth. Unlike microeconomics, which focuses on individual consumers, firms, and markets, macroeconomics analyzes relationships among households, businesses, governments, and broad markets such as financial and labor markets. Macroeconomic analysis is organized around different time horizons. In the short run, it focuses on business-cycle fluctuations and aggregate demand, using monetary and fiscal policies to stabilize output and employment. In the medium run, output and unemployment are influenced by capital, technology, labor-market structures, and the natural rate of unemployment. In the long run, economic growth depends on human and physical capital accumulation, technological innovation, education, research and development, and demographic change. Macroeconomics also studies open economies, international trade, exchange rates, and the balance of payments, using models such as IS-LM, AD-AS, and growth models to explain economic outcomes and guide policy.
The three central macroeconomic variables are output, unemployment, and inflation; GDP measures national production, while the GDP deflator separates changes in prices from changes in real output.
Macroeconomic issues vary by time horizon: short-run stabilization concerns business cycles and aggregate demand, medium-run analysis concerns structural unemployment and productive capacity, and long-run analysis concerns economic growth.
Monetary policy influences interest rates, money, inflation, and aggregate demand, while fiscal policy uses taxation and government spending to affect output, employment, and economic stability.
Macroeconomics developed as a distinct field with John Maynard Keynes's 1936 publication of The General Theory of Employment, Interest and Money, building on earlier work in monetary and business-cycle theory.
Open-economy macroeconomics examines international trade, exchange rates, capital flows, labor migration, and the accumulation of foreign assets and liabilities.
The branch of economics that studies the economy as a whole using aggregate variables and broad economic relationships.
The total value of final goods and services produced within a country during a specified period.
The total planned spending on goods and services in an economy at a given price level.
The total quantity of goods and services that firms are willing and able to produce at different price levels.
A sustained general increase in the prices of goods and services across an economy.
The percentage of people in the labor force who do not have a job but are actively seeking work.
The medium-run level of unemployment that exists when cyclical unemployment is absent, including frictional and structural unemployment.
The use of interest rates, money supply, and other central-bank tools to influence economic activity and inflation.
The use of government taxation and spending to influence aggregate demand, output, employment, and economic stability.
An index measuring the change in the overall price level by comparing nominal GDP with real GDP.
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