Macroeconomics is the branch of economics concerned with the efficiency, structure, behavior, and decision making of the economy as a whole, rather than the behavior of individuals and firms. The main actors in macroeconomics are policy makers responsible for fiscal policy (taxation and government spending) and monetary policy (setting interest rates).
Politicians and central banks
In most countries, the government, including the finance minister, prime minister or president, and the legislature determine fiscal policy (public spending and taxes). Monetary policy, which determines the money supply and sets interest rates, is usually set by a country's central bank (Bank of Japan, European Central Bank, Federal Reserve System). United States and the Bank of England). At times, the Treasury will play a role in monetary policy as it may be involved in buying and selling government bonds.
Fiscal policy affects the overall level of production, monetary policy affects the liquidity of the economy. The main actors in macroeconomics are politicians (ministers of finance, prime ministers, presidents, legislatures) and central banks. Macroeconomics is one of the main divisions in the field of economics. What is it, why is it important and what are its main principles?
What is macroeconomics?
Macroeconomics - is the study of economics involving phenomena that affect the entire economy, including inflation, unemployment, price levels, economic growth, economic recession and the relationship between all these factors. While microeconomics looks at how households and businesses make decisions and behave in the marketplace, macroeconomics looks at the big picture – it analyzes the entire economy.
The importance of macroeconomics
We live in a complex and interconnected world. Most of us depend on the economy to provide jobs or business opportunities so we can earn money to buy the goods and services we need; to survive and function in modern society. The study of macroeconomics allows usbetter understand what makes our economy grow and what makes it shrink.
A growing economy provides opportunities to improve lives, while a shrinking economy can be disastrous for most people. Macroeconomics provides analysis for the right policy making so that we can develop and develop the best possible economy. Macroeconomic research focuses on three broad areas and the relationship between them. These three concepts affect all participants in the economy, including consumers, workers, manufacturers and government.
The main subjects in macroeconomics are… (according to Galperin)
Macroeconomics deals with aggregates. This area analyzes several major economic actors at once. So, in his textbook "Macroeconomics" V. M. Galperin identifies 4 points. In his opinion, the main subjects in macroeconomics are the following:
- Households.
- Entrepreneurship.
- State.
- Foreign sector.
Let's take a closer look at each of these sectors.
Households
The first of the main subjects in macroeconomics is the household. These are the so-called private economic associations within the country. Their characteristics are as follows:
- They can make their own decisions.
- They own a certain factorproduction.
- They have a desire to satisfy their needs as best as possible.
Three types of business activity are typical for households. Firstly, they offer factors of production, secondly, they themselves consume a certain part of the income, and thirdly, part of the income falls under savings.
Entrepreneurial sector
The second main subject of study of macroeconomics is entrepreneurship. These are all firms and organizations officially registered within a certain state. The characteristics of these economic units are as follows:
- They can, like households, make their own decisions.
- Firms seek to maximize profits.
- Entrepreneurs engage in the efficient use of factors of production to make and sell products or services to other firms, households, or the public sector.
The business sector is characterized by 3 types of business activity. Important categories are factor demand, supply, and investment.
State
The main actors in macroeconomics are several options, including the state, which includes all government agencies that have control over economic actors and markets. Getting the maximum profit is not a primary goal. The main goal of this sector is to regulate macroeconomic balance. This is done in three ways:
- swith the help of state social programs;
- maintaining a high level of employment;
- by interfering with market mechanisms.
Government spending is partly covered by taxes, which go to pay pension benefits, unemployment benefits, compensation for the poor, targeted subsidies and so on. The public sector is characterized by 3 types of business activity. First, it is the purchase of general services and goods that society needs. Secondly, it is the collection of taxes, which contributes to the regulation of income. Thirdly, this is the money supply, which is designed to stimulate the economic activity of market entities.
Foreign sector
The main three subjects of macroeconomics are households, entrepreneurship and the state. The foreign sector can be put in the fourth position, although it also plays an important role in macroeconomics. This sector includes domestic economic entities that are outside this state. The overseas sector has 3 business activities:
- He carries out mutual exchange of goods and services.
- He exchanges capital and foreign exchange.
- He is also responsible for lending and borrowing.
Other subjects in macroeconomics
The above are the main subjects in macroeconomics. The answer to the question, what other subjects are there in macroeconomics, will be the banking sector,including the Central Bank, as well as a whole system of commercial banks. This important sector also strongly influences the creation and movement of cash and non-cash funds and investments. This sector is characterized by 4 main types of business activity:
- Banks offer paper money.
- They control the flow of paper money.
- They are engaged in foreign exchange transactions.
- They do lending.
What are the main subjects in macroeconomics? At MTI ("Moscow Technological Institute"), characterizing one of the goals of mastering the discipline "commerce", they give the following answer: "Students must learn to analyze the processes of the economy, establish relationships between them, determine the properties of economic entities (financial institutions, enterprises, the state, population)".
