Basic macroeconomics

Government's monthly survey of unemployment and labor force participation.

Basic macroeconomics

Outside of macroeconomic theory, these topics are also important to all economic agents including workers, consumers, and producers. Output and income[ edit ] National output is the total amount of everything a country produces in a given period of time.

Everything that is produced and sold generates an equal amount of income.

Nature of Macroeconomics

The total output of the economy is measured GDP per person. Output can be measured or it can be viewed from the production side and measured as the total value of final goods and services or the sum of all value added in the economy. Economists interested in long-run increases in output study economic growth.

Advances in technology, accumulation of machinery and other capitaland better education and human capital are all factors that lead to increased economic output over time. However, output does not always increase consistently over time. Business cycles can cause short-term drops in output called recessions.

Economists look for macroeconomic policies that prevent economies from slipping into recessions and that lead to faster long-term growth. The relationship demonstrates cyclical unemployment.

Economic growth leads to a lower unemployment rate. The amount of unemployment in an economy is measured by the unemployment rate, i. The unemployment rate in the labor force only includes workers actively looking for jobs. People who are retired, pursuing education, or discouraged from seeking work by a lack of job prospects are excluded.

Unemployment can be generally broken down into several types that are related to different causes. Classical unemployment theory suggests that unemployment occurs when wages are too high for employers to be willing to hire more workers.

According to these more recent theories, unemployment results from reduced demand for the goods and services produced through labor and suggest that only in markets where profit margins are very low, and in which the market will not bear a price increase of product or service, will higher wages result in unemployment.

Consistent with classical unemployment theory, frictional unemployment occurs when appropriate job vacancies exist for a worker, but the length of time needed to search for and find the job leads to a period of unemployment. Structural unemployment is similar to frictional unemployment as both reflect the problem of matching workers with job vacancies, but structural unemployment also covers the time needed to acquire new skills in addition to the short-term search process.

Over the long run, the two series show a close relationship. A general price increase across the entire economy is called inflation. When prices decrease, there is deflation.

Economists measure these changes in prices with price indexes. Inflation can occur when an economy becomes overheated and grows too quickly. Similarly, a declining economy can lead to deflation. Raising interest rates or reducing the supply of money in an economy will reduce inflation.

Inflation can lead to increased uncertainty and other negative consequences.

Working Papers & Publications

Deflation can lower economic output. Central bankers try to stabilize prices to protect economies from the negative consequences of price changes. Changes in price level may be the result of several factors.

The quantity theory of money holds that changes in price level are directly related to changes in the money supply. Most economists believe that this relationship explains long-run changes in the price level. For example, a decrease in demand due to a recession can lead to lower price levels and deflation.

A negative supply shock, such as an oil crisis, lowers aggregate supply and can cause inflation. The AD-AS model has become the standard textbook model for explaining the macroeconomy.

The AD—AS diagram can model a variety of macroeconomic phenomena, including inflation. Changes in the non-price level factors or determinants cause changes in aggregate demand and shifts of the entire aggregate demand AD curve.

When demand for goods exceeds supply there is an inflationary gap where demand-pull inflation occurs and the AD curve shifts upward to a higher price level.

When the economy faces higher costs, cost-push inflation occurs and the AS curve shifts upward to higher price levels. The IS—LM model represents all the combinations of interest rates and output that ensure the equilibrium in the goods and money markets.

The Solow model assumes that labor and capital are used at constant rates without the fluctuations in unemployment and capital utilization commonly seen in business cycles. An increase in the savings rate leads to a temporary increase as the economy creates more capital, which adds to output.

Get fast, free shipping with Amazon PrimeShop Best Sellers · Shop Our Huge Selection · Deals of the Day · Read Ratings & Reviews. Macroeconomics is a part of economic study which analyzes the economy as a whole. It is the average of the entire economy and does not study any individual unit or a firm. It studies the national income, total employment, aggregate demand and supply etc. Macroeconomics is basically known as theory. New classical macroeconomics, sometimes simply called new classical economics, is a school of thought in macroeconomics that builds its analysis entirely on a neoclassical framework. Specifically, it emphasizes the importance of rigorous foundations based on microeconomics, especially rational expectations.. New classical macroeconomics strives to provide neoclassical microeconomic .

However, eventually the depreciation rate will limit the expansion of capital: Both forms of policy are used to stabilize the economywhich can mean boosting the economy to the level of GDP consistent with full employment.Principles of Macroeconomics – A Basic Explanation of Key Principles National Income – The area of macroeconomics analyses the wealth a nation generates.

There are different measures for this such as Gross National Product, Gross Domestic Product, and Net National Income. has been an NCCRS member since October The mission of is to make education accessible to everyone, everywhere.

Students can save on their education by taking the online, self-paced courses and earn widely transferable college credit recommendations for a fraction of the cost of a traditional course. The CPS is the U.S.

How the Economic Machine Works [Animation] by Ray Dalio

Government's monthly survey of unemployment and labor force participation. The BLS maintains a CPS Home Page with a great deal of information about the survey and access to downloads of recent CPS basic monthly files contain information on labor force status but do not contain the full income and demographic data contained in the March supplements, nor do they.

Paul Krugman, a New York Times Op-Ed columnist, writes about macroeconomics, trade, health care, social policy and politics. In , he received the Nobel Prize in Economics.

Basic macroeconomics

Learn for free about math, art, computer programming, economics, physics, chemistry, biology, medicine, finance, history, and more. Khan Academy is a nonprofit with the mission of providing a free, world-class education for anyone, anywhere.

In short, economics is the study of how people and groups of people use their resources. Money certainly is one of those resources, but other things can play a role in economics as well.

In an attempt to clarify all this, let's take a look at the basics of economics and why you might consider studying this complex field.

Macroeconomics - Wikipedia