essay on macroeconomics

Macro Economic Essays

These are a collection of essays written for my economic blogs.

Exchange Rate Essays

• Effects of a falling Dollar
• Why Dollar keeps falling
• Discuss Policies to Stop the Dollar Falling
• Does Devaluation Cause Inflation?
• Benefits and Costs of Falling Dollar
• Reasons for Falling Dollar
• The Dollar as the World’s Reserve Currency

Economic Growth Essays

• Evaluate Benefits of Economic Growth
• Essays on Recessions
• Causes of Recessions
• Problems of Recovering from a Recession
• What can Increase Long-Run Economic Growth?
• Discuss Effect of a fall in the Savings Ratio

Inflation Essays

• Discuss the Difficulties of Controlling Inflation
• Should the aim of the Government be to Attain Low Inflation?
• Explain What Can Cause a Sustained Increase in the Rate of Inflation
• Reasons for low inflation in the UK
• Inflation Explained
• Difficulties of Inflation targeting
• Hyperinflation

Unemployment Essays

• Explain what is meant by Natural Rate of Unemployment?
• Should the Main Macro Economic Aim of the Government be Full Employment?
• The True Level of Unemployment in the UK
• What explains low inflation and low unemployment in the UK?

Demand Side Policies

• Discuss effect of Expansionary demand-side policies on Balance of Payments and Environment
• Effects of a Falling Stock Market
• How do Mortgage Defaults affect and Economy?
• Discuss the effect of increased Government spending on education
• Phillips Curve – Trade-off between Inflation and Unemployment

Development Economics

• Why Growth may not benefit developing countries
• Does Aid Increase Economic Welfare?
• Problems of Free Trade for Developing Economies

Fiscal Policy

• Will US Economy benefit from Tax Cuts?
• Can Fiscal Policy solve Unemployment?
• Explain Reasons for UK Current Account Deficit
• Benefits of Globalisation for Developing and Developed Countries

Monetary Policy

• Discuss Effects of an Increase in Interest Rates
• How MPC set Interest Rates
• Benefits of High-Interest Rates (and recessions)
• Who Sets interest rates – Markets or Bank of England?

Economic History

• Economics of the 1920s
• What Caused Wall Street Crash of 1929?
• UK economy under Mrs Thatcher
• Economy of the 1970s
• Lawson Boom of the 1980s
• UK recession of 1991
• The great recession 2008-13

General Economic Essays

• The Dismal Science
• Difference Between Economists and Non Economists
• War and Recessions
• The Economics of Fear
• The Economics of Happiness
• Can UK and US avoid Recession?
• 3 Of the Worst Economic Policies
• Overvalued Housing Markets
• What Went Wrong with US Economy?
• Problem with Bailing out financial sector
• Problems of Personal Debt
• Problem of Inflation
• National Debt in the UK
• How To Survive a Recession
• Can A recession be a good thing?

Chinese Economy

• Problems of Chinese Economic Growth
• Should we worry about a strong China
• Chinese Growth and Costs of Growth
• Chinese Interest Rates and Economic Growth

Model essays

• A2 model essays
• AS model essays
• Top 10 Reasons For Studying Economics
• Inflation explained by Victor Borge
• Funny Exam Answers
• Humorous look at Subprime crisis

Home — Essay Samples — Economics — Macroeconomics

Essays on Macroeconomics

Brief description of macroeconomics.

Macroeconomics is the study of the economy as a whole, focusing on factors such as inflation, unemployment, economic growth, and the effects of government economic policies. It is an essential field of study for understanding the functioning of national and global economies, and it provides valuable insights into how economic decisions impact individuals and societies.

Importance of Writing Essays on This Topic

Essays on macroeconomics are significant for both academic and personal exploration. They allow students to delve deeper into complex economic concepts, develop critical thinking skills, and gain a better understanding of real-world economic issues. Additionally, writing essays on macroeconomics enables individuals to engage with current economic debates and contribute to the discourse on economic policy and societal well-being.

Tips on Choosing a Good Topic

• Consider current events and their impact on the economy, such as the effects of the COVID-19 pandemic on economic stability.
• Explore the intersection of macroeconomics with other disciplines, such as environmental economics or labor economics, to find unique and thought-provoking topics.
• Focus on areas of economic policy and its implications for society, such as the debate over austerity measures or the relationship between economic inequality and social welfare.

Essay Topics

• The impact of government stimulus packages on economic recovery
• The relationship between inflation and unemployment
• Analyzing the effectiveness of monetary policy in controlling inflation
• The role of international trade in economic growth
• Investigating the causes and consequences of economic recessions
• The impact of automation on employment and wages
• Exploring the concept of sustainable economic growth
• The implications of national debt on future generations
• The role of central banks in stabilizing the economy
• Analyzing the economic effects of immigration policies

Concluding Thought

Engaging with macroeconomics through essay writing provides an opportunity to deepen your understanding of economic principles and their real-world applications. By exploring diverse topics within the field of macroeconomics, you can develop critical thinking skills and contribute to the ongoing discourse on economic policy and societal well-being. Embrace the opportunity to explore and critically engage with macroeconomics through essay writing.

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What Is Macroeconomics?

Understanding macroeconomics.

• Macro vs. Microeconomics
• Limitations
• Schools of Thought

How to Influence Macroeconomics

The bottom line.

• Macroeconomics

Macroeconomics Definition, History, and Schools of Thought

Thomas J Catalano is a CFP and Registered Investment Adviser with the state of South Carolina, where he launched his own financial advisory firm in 2018. Thomas' experience gives him expertise in a variety of areas including investments, retirement, insurance, and financial planning.

Pete Rathburn is a copy editor and fact-checker with expertise in economics and personal finance and over twenty years of experience in the classroom.

Macroeconomics is a branch of economics that studies the behavior of an overall economy, which encompasses markets, businesses, consumers, and governments. Macroeconomics examines economy-wide phenomena such as inflation, price levels, rate of economic growth, national income, gross domestic product (GDP), and changes in unemployment.

Some of the key questions addressed by macroeconomics include: What causes unemployment? What causes inflation? What creates or stimulates economic growth? Macroeconomics attempts to measure how well an economy is performing, understand what forces drive it, and project how performance can improve.

Key Takeaways

• Macroeconomics is the branch of economics that deals with the structure, performance, behavior, and decision-making of the whole, or aggregate, economy.
• The two main areas of macroeconomic research are long-term economic growth and shorter-term business cycles.
• Macroeconomics in its modern form is often defined as starting with John Maynard Keynes and his theories about market behavior and governmental policies in the 1930s; several schools of thought have developed since.
• In contrast to macroeconomics, microeconomics is more focused on the influences on and choices made by individual actors—such as people, companies, and industries—in the economy.

Investopedia / Julie Bang

As the term implies, macroeconomics is a field of study that analyzes an economy through a wide lens. This includes looking at variables like unemployment, GDP , and inflation . In addition, macroeconomists develop models explaining the relationships between these factors.

These models, and the forecasts they produce, are used by government entities to aid in constructing and evaluating economic, monetary, and fiscal policy. Businesses use the models to set strategies in domestic and global markets, and investors use them to predict and plan for movements in various asset classes.

Properly applied, economic theories can illuminate how economies function and the long-term consequences of particular policies and decisions. Macroeconomic theory can also help individual businesses and investors make better decisions through a more thorough understanding of the effects of broad economic trends and policies on their own industries.

History of Macroeconomics

While the term "macroeconomics" dates back to the 1940s, many of the field's core concepts have been subjects of study for much longer. Topics like unemployment, prices, growth, and trade have concerned economists since the beginning of the discipline in the 1700s. Elements of earlier work from Adam Smith and John Stuart Mill addressed issues that would now be recognized as the domain of macroeconomics.

In its modern form, macroeconomics is often defined as starting with John Maynard Keynes and his book The General Theory of Employment, Interest, and Money in 1936. In it, Keynes explained the fallout from the Great Depression , when goods went unsold and workers were unemployed.

Throughout the 20th century, Keynesian economics, as Keynes' theories became known, diverged into several other schools of thought.

Before the popularization of Keynes' theories, economists generally did not differentiate between microeconomics and macroeconomics. The same microeconomic laws of supply and demand that operate in individual goods markets were understood to interact between individual markets to bring the economy into a general equilibrium , as described by Leon Walras .

The link between goods markets and large-scale financial variables such as price levels and interest rates was explained through the unique role that money plays in the economy as a medium of exchange by economists such as Knut Wicksell, Irving Fisher, and Ludwig von Mises.

Macroeconomics vs. Microeconomics

Macroeconomics differs from microeconomics , which focuses on smaller factors that affect choices made by individuals. Individuals are typically classified into subgroups, such as buyers, sellers , and business owners. These actors interact with each other according to the laws of supply and demand for resources, using money and interest rates as pricing mechanisms for coordination. Factors studied in both microeconomics and macroeconomics typically influence one another.

A key distinction between microeconomics and macroeconomics is that macroeconomic aggregates can sometimes behave in very different ways or even the opposite of similar microeconomic variables. For example, Keynes referenced the so-called Paradox of Thrift, which argues that individuals save money to build wealth on a microeconomic level. However, when everyone tries to increase their savings at once, it can contribute to a slowdown in the economy and less wealth in the aggregate, macroeconomic level. This is because there would be a reduction in spending, affecting business revenues, and lowering worker pay.

Limits of Macroeconomics

It is also important to understand the limitations of economic theory. Theories are often created in a vacuum and lack specific real-world details like taxation, regulation, and transaction costs. The real world is also decidedly complicated and includes matters of social preference and conscience that do not lend themselves to mathematical analysis.

It is common to find the phrase ceterus paribus , loosely translated as "all else being equal," in economic theories and discussions. Economists use this phrase to focus on specific relationships between variables being discussed, while assuming all other variables remain fixed.

Even with the limits of economic theory, it is important and worthwhile to follow significant macroeconomic indicators like GDP, inflation, and unemployment. This is because the performance of companies, and by extension their stocks, is significantly influenced by the economic conditions in which the companies operate.

Likewise, it can be invaluable to understand which theories are currently in favor, and how they may be influencing a particular government administration. Such economic theories can say much about how a government will approach taxation, regulation, government spending, and similar policies. By better understanding economics and the ramifications of economic decisions, investors can get at least a glimpse of the probable future and act accordingly with confidence.

Macroeconomic Schools of Thought

The field of macroeconomics is organized into many different schools of thought, with differing views on how the markets and their participants operate.

Classical economists held that prices, wages, and rates are flexible and markets tend to clear unless prevented from doing so by government policy; these ideas build on Adam Smith's original theories. The term “classical economists” is not actually a school of macroeconomic thought but a label applied first by Karl Marx and later by Keynes to denote previous economic thinkers with whom they disagreed.

Keynesian economics was founded mainly based on the works of John Maynard Keynes and was the beginning of macroeconomics as a separate area of study from microeconomics. Keynesians focus on aggregate demand as the principal factor in issues like unemployment and the business cycle.

Keynesian economists believe that the business cycle can be managed by active government intervention through fiscal policy, where governments spend more in recessions to stimulate demand or spend less in expansions to decrease it. They also believe in monetary policy, where a central bank stimulates lending with lower rates or restricts it with higher ones.

Keynesian economists also believe that certain rigidities in the system, particularly sticky prices , prevent the proper clearing of supply and demand.

The Monetarist school is a branch of Keynesian economics credited mainly to the works of Milton Friedman. Working within and extending Keynesian models, Monetarists argue that monetary policy is generally a more effective and desirable policy tool to manage aggregate demand than fiscal policy. However, monetarists also acknowledge limits to monetary policy that make fine-tuning the economy ill-advised and instead tend to prefer adherence to policy rules that promote stable inflation rates.

New Classical

The New Classical school, along with the New Keynesians, is mainly built on integrating microeconomic foundations into macroeconomics to resolve the glaring theoretical contradictions between the two subjects.

The New Classical school emphasizes the importance of microeconomics and models based on that behavior. New Classical economists assume that all agents try to maximize their utility and have rational expectations , which they incorporate into macroeconomic models. New Classical economists believe that unemployment is largely voluntary and that discretionary fiscal policy destabilizes, while inflation can be controlled with monetary policy.

New Keynesian

The New Keynesian school also attempts to add microeconomic foundations to traditional Keynesian economic theories. While New Keynesians accept that households and firms operate based on rational expectations, they still maintain that there are a variety of market failures, including sticky prices and wages. Because of this "stickiness," the government can improve macroeconomic conditions through fiscal and monetary policy.

The Austrian Schoo l is an older school of economics that is seeing some resurgence in popularity. Austrian economic theories mainly apply to microeconomic phenomena. However, like the so-called classical economists, they never strictly separated microeconomics and macroeconomics.

Austrian theories also have important implications for what are otherwise considered macroeconomic subjects. In particular, the Austrian business cycle theory explains broadly synchronized (macroeconomic) swings in economic activity across markets due to monetary policy and the role that money and banking play in linking (microeconomic) markets to each other and across time. 

Macroeconomic Indicators

Macroeconomics is a rather broad field, but two specific research areas dominate the discipline. The first area looks at the factors that determine long-term economic growth . The other looks at the causes and consequences of short-term fluctuations in national income and employment, also known as the business cycle .

Economic Growth

Economic growth refers to an increase in aggregate production in an economy. Macroeconomists try to understand the factors that either promote or retard economic growth to support economic policies that will support development, progress, and rising living standards.

Economists can use many indicators to measure economic performance. These indicators fall into 10 categories:

• Gross Domestic Product indicators : Measure how much the economy produces
• Consumer Spending indicators : Measure how much capital consumers feed back into the economy
• Income and Savings indicators : Measure how much consumers make and save
• Industry Performance indicators : Measure GDP by industry
• International Trade and Investment indicators : Indicate the balance of payments between trade partners, how much is traded, and how much is invested internationally
• Prices and Inflation indicators : Indicate fluctuations in prices paid for goods and services and changes in currency purchasing power
• Investment in Fixed Assets indicators : Indicate how much capital is tied up in fixed assets
• Employment indicators : Show employment by industry, state, county, and other areas
• Government indicators : Show how much the government spends and receives
• Special indicators : Include all other economic indicators, such as distribution of personal income, global value chains, healthcare spending, small business well-being, and more

The Business Cycle

Superimposed over long-term macroeconomic growth trends, the levels and rates of change of significant macroeconomic variables such as employment and national output go through fluctuations. These fluctuations are called expansions, peaks, recessions, and troughs—they also occur in that order. When charted on a graph, these fluctuations show that businesses perform in cycles; thus, it is called the business cycle.

The National Bureau of Economic Research (NBER) measures the business cycle, which uses GDP and Gross National Income to date the cycle. The NBER is also the agency that declares the beginning and end of recessions and expansions.

Because macroeconomics is such a broad area, positively influencing the economy is challenging and takes much longer than changing the individual behaviors within microeconomics. Therefore, economies need to have an entity dedicated to researching and identifying techniques that can influence large-scale changes.

In the U.S., the Federal Reserve is the central bank with a mandate of promoting maximum employment and price stability. These two factors have been identified as essential to positively influencing change at the macroeconomic level.

To influence change, the Fed implements monetary policy through tools it has developed over the years, which work to affect its dual mandates. It has the following tools it can use:

• Federal Funds Rate Range : A target range set by the Fed that guides interest rates on overnight lending between depository institutions to boost short-term borrowing
• Open Market Operations : Purchase and sell securities on the open market to change the supply of reserves
• Discount Window and Rate : Lending to depository institutions to help banks manage liquidity
• Reserve Requirements : Maintaining a reserve to help banks maintain liquidity
• Interest on Reserve Balances : Encourages banks to hold reserves for liquidity and pays them interest for doing so
• Overnight Repurchase Agreement Facility : A supplementary tool used to help control the federal funds rate by selling securities and repurchasing them the next day at a more favorable rate
• Term Deposit Facility : Reserve deposits with a term, used to drain reserves from the banking system
• Central Bank Liquidity Swaps : Established swap lines for central banks from select countries to improve liquidity conditions in the U.S. and participating countries' central banks
• Foreign and International Monetary Authorities Repo Facility : A facility for institutions to enter repurchase agreements with the Fed to act as a backstop for liquidity
• Standing Overnight Repurchase Agreement Facility : A facility to encourage or discourage borrowing above a set rate, which helps to control the effective federal funds rate

The Fed continuously updates the tools it uses to influence the economy, so it has a list of many other previously used tools it can implement again if needed.

What is the most important concept in all of macroeconomics?

The most important concept in all of macroeconomics is said to be output, which refers to the total amount of good and services a country produces. Output is often considered a snapshot of an economy at a given moment.

What are the 3 Major Concerns of Macroeconomics?

Three major macroeconomic concerns are the unemployment level, inflation, and economic growth.

Why Is Macroeconics Important?

Macroeconomics helps a government evaluate how an economy is performing and decide on actions it can take to increase or slow growth.

Macroeconomics is a field of study used to evaluate overall economic performance and develop actions that can positively affect an economy. Economists work to understand how specific factors and actions affect output, input, spending, consumption, inflation, and employment.

The study of economics began long ago, but the field didn't start evolving into its current form until the 1700s. Macroeconomics now plays a large part in government and business decision-making.

Bureau of Economic Analysis. " Data by Topic ."

National Bureau of Economic Research. " US Business Cycle Expansions and Contractions ."

Board of Governors of the Federal Reserve. " Policy Tools ."

Board of Governors of the Federal Reserve System. " Policy Tools | Expired Tools ."

• Economics Defined with Types, Indicators, and Systems 1 of 33
• Economy: What It Is, Types of Economies, Economic Indicators 2 of 33
• A Brief History of Economics 3 of 33
• Is Economics a Science? 4 of 33
• Finance vs. Economics: What's the Difference? 5 of 33
• Macroeconomics Definition, History, and Schools of Thought 6 of 33
• Microeconomics Definition, Uses, and Concepts 7 of 33
• 4 Economic Concepts Consumers Need To Know 8 of 33
• Law of Supply and Demand in Economics: How It Works 9 of 33
• Demand-Side Economics Definition, Examples of Policies 10 of 33
• Supply-Side Theory: Definition and Comparison to Demand-Side 11 of 33
• What Is a Market Economy and How Does It Work? 12 of 33
• Command Economy: Definition, How It Works, and Characteristics 13 of 33
• Economic Value: Definition, Examples, Ways To Estimate 14 of 33
• Keynesian Economics Theory: Definition and How It's Used 15 of 33
• What Is Social Economics, and How Does It Impact Society? 16 of 33
• Economic Indicator: Definition and How to Interpret 17 of 33
• Top 10 U.S. Economic Indicators 18 of 33
• Gross Domestic Product (GDP) Formula and How to Use It 19 of 33
• What Is GDP and Why Is It So Important to Economists and Investors? 20 of 33
• Consumer Spending: Definition, Measurement, and Importance 21 of 33
• Retail Sales: Definition, Measurement, and Use As an Economic Indicator 22 of 33
• Job Market: Definition, Measurement, Example 23 of 33
• The Top 25 Economies in the World 24 of 33
• What Are Some Examples of Free Market Economies? 25 of 33
• Is the United States a Market Economy or a Mixed Economy? 26 of 33
• Primary Drivers of the Chinese Economy 27 of 33
• Japan Inc.: What It is, How It Works, History 28 of 33
• The Fundamentals of How India Makes Its Money 29 of 33
• European Union (EU): What It Is, Countries, History, Purpose 30 of 33
• The German Economic Miracle Post WWII 31 of 33
• The Economy of the United Kingdom 32 of 33
• How the North Korean Economy Works 33 of 33

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