Macroeconomics is the branch of economics that focuses on the economy as a whole. The key areas studied by macroeconomists are inflation, unemployment and national output.
Macroeconomics studies the behaviour of governments, businesses, the markets and consumers across wide swathes of the population. Conversely, microeconomics studies the actions and effects of the individual. You can learn more about microeconomics in the PDF attachment to this post.
Domen Zavrl has a PhD in Applied Macroeconomics from Klagenfurt University and is interested in economics as a whole. Macroeconomic factors are influential events that can have an effect on national or regional economies, which can be natural, fiscal or geopolitical.
Tracking Economic Performance Metrics
Those in the field of macroeconomics track a variety of economic performance metrics across factors such as gross domestic product, inflation, unemployment levels, monetary policies and national income. These are all factors that can affect the direction of any economy on a large scale. Macroeconomists not only track this data but also identify correlations between these various factors. This results in usable information for governments and states as well as companies and individual consumers. Patterns can be identified and used to predict future economic outcomes.
Some of the other primary areas of economic research are detailed in the embedded infographic.
Positive, Negative and Neutral Macroeconomic Factors
Macroeconomic factors can be defined as positive, negative or neutral, depending on the effect or potential effect they have on economies.
Positive macroeconomic factors are those which lead to economic growth and prosperity, whether on a global scale or within one nation or a group of nations. An example of a positive macroeconomic factor would be a reduction in fuel prices in one specific nation. As consumers have more disposable income, they are driven to purchase more goods and services. This increased demand for retail has a ripple effect – suppliers both within the nation and internationally will experience increased revenue and profits, which in turn can increase stock prices.
Negative macroeconomic factors are those which may place national or international economies in jeopardy. One of the largest negative macroeconomic factors to surface in recent years has been the global pandemic, which triggered lockdowns resulting in supply shutdowns, huge government spending and mass unemployment, and later led to rapid inflation. Natural disasters, fears of political instability and large-scale fiscal crises such as the 2008 global financial crisis are all examples of negative macroeconomic factors. The knock-on effects of events such as these spread far and wide and can be long-lasting.
Neutral macroeconomic factors are those which do not have positive or negative implications in and of themselves. The positive or negative effects of these factors depend on the nature and intent of the action, and the effects can be different for various economies. An example would be a trade embargo being enacted or rescinded – myriad effects would be triggered, which could have positive or negative results depending on which side of the embargo an economy lies.
The Importance of Macroeconomic Research
The study of macroeconomic factors forms an essential part of any high-level decision-making that can affect economies on a broad scale. Identifying macroeconomic factor trends facilitates the prediction of patterns, which in turn allows for more informed decisions to be made by governments and states as well as businesses. Individuals can also benefit from macroeconomic research, as it can be used to forecast future unemployment rates or future economic prosperity.