Unit 10 Macroeconomics and microeconomics

of economic growth, and so on. The question asked by the macroeconomist 
are in terms of broad aggregates - what the spending of all consumers as 
opposed to the microeconomic question of how the spending decisions of 
individual households are made; determines the capital spending of all 
firms combined as opposed to the decision to build anew factory by a 
single firm; what determines total unemployment it 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 to reconcile forecasts with target values o f 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 
there 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 determine what goals could be achieved. Experience teaches 
that it would not be possible to inflation entirely without inducing 
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 resent 
experience suggests that reduction of unemployment to 5.5 percent of the 
labor force is about as we can do.

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