What is Macroeconomics?
The word macroeconomics means economics in the large. The macroeconomist's concerns are with such global questions as total production, total employment, the rate of change of overall prices, the rate of economic growth, and so on. The questions asked by the macroeconomist are in terms of broad aggregates—what determines the spending of all consumers as opposed to the microeconomic question of how the spending decisions of individual households are made; what determines the capital spending of all firms combined as opposed to the decision to build a new factory by a single firm; what determines total unemployment in the economy as opposed to why there have been layoffs in a specific industry.
Macroeconomists measure overall economic activity; analyze the determinants of such activity by the use of macroeconomic theory: forecast future economic activity; and attempt to formulate policy responses designed toreconcile forecasts with target values of production, employment, and prices.
An important task of macroeconomics is to develop ways of aggregating the values of the economic activities of individuals and firms into meaningful totals. To this end such concepts as gross domestic product (GDP), national income, personal income, and personal disposable income have been developed.
Macroeconomic analysis attempts to explain how the magnitudes of the principal macroeconomic variables are determined and how they interact. And through the development of theories of the business cycle and economic growth, macroeconomics helps to explain the dynamics of how these aggregates move over time.
Macroeconomics is concerned with such major policy issues as the attainment and maintenance of full employment and price stability. Considerable effort must first be expended to determine what goals could be achieved. Experience teaches that it would not be possible to eliminate inflation entirely without inducing a major recession combined with high unemployment. Similarly, an overambitious employment target would produce labor shortages and wage inflation.
During the 1960s it was believed that unemployment could be reduced to 4 percent of the labor force without causing inflation. More recent experience suggests that reduction of unemployment to 5.5 percent of the labor force is about as well as we can do.
Vocabulary:
total production - общая производителъностъ
total employment - общая занятость
the rate of change of overall prices – коэффициент изменений предельных цен
rate of economic growth - темпы экономического роста
broad aggregates - масштабные совокупности
individual households – индивидуальные хазяйства
layoffs - увольнение
economic activity - экономическая активность
determinant - показатель, определител
ь value - ценность
meaningful totals - значимые итоги
gross domestic product (GDP) - валовой внутренний продукт (ВВП)
national income - национальный доход
personal income - личный доход
personal disposable income - личный доход после уплаты налогов
business cycle - экономический цикл
economic growth - экономический рост
attainment – достижения
maintenance - поддержание, содержание
price stability - стабильность цен
eliminate - ликвидировать, исключать
labor shortage - нехватка рабочей силы
reduction - уменьшение
General understanding
l)What does the word macroeconomics mean? 2) What are the concerns of the macroeconomist?3)What is the difference between the questions asked by macroeconomists and microeconomics? 4)What is, according to the text, the important task of macroeconomist? 5) What does macroeconomic analysis attempt to
explain? 6) What are the concepts of macroeconomics? 7) What are the most important theories of macroeconomics? 8) What is said about the correlation between the inflation and unemployment?
1. Macroeconomics vs. microeconomics. Fill in the table to show the difference between:
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Macroeconomics |
Microeconomics |
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2. Which of the following statements are true about macroeconomics and macroeconomists:
a) Macroeconomics deals with global questions only.
b) Macroeconomics means economics in the large because it asks more questions than microeconomics.
c) Macroeconomist analyzes activities of families and large firms.
d) Such concepts as gross domestic product, national income and personal disposable income serve as meaningful totals.
e)Macroeconomic analysis shows the development of the economic theory.
f)Theory of business cycles concerns business. That is why this is a microeconomic theory.
g)Inflation could not be eliminated without some negative changes in economics. h)More recent experience proves that macroeconomists of 60s were wrong.
3. Translate into Russian:
a)The questions asked by the macroeconomist are in terms of broad aggregates b)What determines the capital spending of all firms combined as opposed to the decision to build a new factory by a single firm? c) Macroeconomists measure overall economic activity; analyze the determinants of such activity by the use of macroeconomic theory. d) Macroeconomic analysis attempts to explain how the magnitudes of the principal macroeconomic variables are determined.
e)Considerable effort must first be expended to determine what goals could be achieved.
f) More recent experience suggests the reduction of unemployment to 5.5 percent of the labor force.
g)Experience teaches that it would not be possible to eliminate inflation entirely.
4. Explain in your own words the importance
and practical applications of the following
concepts. (Give the Russian equivalents):
a) total production
b)total employment
c) the rate of change of overall prices
d)GDP
e) national income
f) personal income g)personal disposable income
5. Are you able to answer the following
macroeconomic questions (If not, explain
why it is impossible):
a) What determines the spending of all consumers? b)What determines the capital spending? c) What determines the capital spending of all firms?
Questions for discussion:
l) Was there such a difference between macroeconomics and microeconomics in the Soviet economics? In 18th century? In 19th century?
2) What is more important for economy in general - microeconomics or macroeconomics?
3) Is there a difference in analyzing macroeconomic and microeconomic problems?