Macroeconomics

Macroeconomics is a sub-section of economics which focuses on the behavior of an entire economy, and the actors that exist at that level, such as the Federal Reserve. Looking through this lens, economists observe the financial decisions that manipulate an economy’s elements, such as interest rates, inflation, deflation, and stagflation. Macroeconomics can also explain phenomena that happen on a country-wide scale, such as different types of unemployment, and aggregate supply or demand. It can also be used to describe the current state of an economy, such as a country’s GDP. Economists use macroeconomics to discuss both historical trends and predictions for a certain economy.

Latest posts

Macroeconomics
Cost-Push Inflation

A fall in Aggregate Supply is the cause of Cost-Push Inflation. An interaction of cost-push inflation & demand-pull inflation results in a wage-price spiral.

Prateek Agarwal
November 21, 2020
Macroeconomics
Cyclical Unemployment

Cyclical unemployment is a form of unemployment that occurs as a result of an economic decline or periods of negative economic growth in a business cycle. Other names for cyclical unemployment are “deficient-demand unemployment” or “Keynesian unemployment”.

Prateek Agarwal
November 15, 2020
Macroeconomics
Economic Growth

The economic growth of a country is the increase in the market value of the goods and services produced by an economy over time.

Prateek Agarwal
April 18, 2020
Macroeconomics
Expansionary Monetary Policy

Expansionary monetary policy is a form of macroeconomic monetary policy that seeks to amplify economic growth and aggregate demand. In order to do so, regulatory authorities like central banks “loosen” monetary policy by increasing the money supply and/or lowering interest rates.

Prateek Agarwal
April 07, 2020
Macroeconomics
Inflation

Inflation is the sustained increase of the price level. The rate of inflation is the change in general price levels over a period. When the price level rises, each unit of currency buys fewer goods and services.

Prateek Agarwal
April 06, 2020
Macroeconomics
Business Cycle

The different phases and fluctuations that an economy goes through over time, such as periods of booms (expansions) and economic recessions (contractions), are collectively known as the business cycle.

Prateek Agarwal
March 24, 2020
Macroeconomics
Collective Bargaining

The term “collective bargaining” describes the way in which groups of workers (typically represented by labor unions) negotiate with their employers to determine the terms of their employment.

Prateek Agarwal
March 20, 2020
Macroeconomics
Structural Unemployment

Structural unemployment is a persistent, extended type of unemployment resulting from changes in the foundational structure of the economy. Factors that contribute to structural unemployment include government policy, competition, technology, and more.

Prateek Agarwal
March 05, 2020
Macroeconomics
Stagflation

Stagflation is an unusual economic situation in which high inflation (leading to increasing prices) coincides with increasing unemployment rates and decreasing levels of output/stagnation of economic growth. That’s why it’s called “stagflation”.

Prateek Agarwal
February 14, 2020
Macroeconomics
Frictional Unemployment

To define frictional unemployment more concisely: it is a form of unemployment that arises due to an economy’s employment transitions. It takes place in a healthy and stable economy with plenty of growth. Workers that create frictional unemployment include those who are changing their jobs and those who are first joining the workforce.

Prateek Agarwal
January 28, 2020
Macroeconomics
Unemployment

A person is considered to be unemployed if he doesn’t currently doesn’t have a job and is actively searching for one. When we look at the unemployment rate, we consider someone who is actively seeking a job. Otherwise, we do not count them in the labor force.

Prateek Agarwal
January 27, 2020
Macroeconomics
Gross Domestic Product (GDP)

GDP stands for Gross Domestic Product, and the GDP of a country is the total value of all final goods and services produced within that country over a period of time.

Prateek Agarwal
January 21, 2020
Macroeconomics
Seasonal Unemployment

The concept of seasonal unemployment describes a situation when workers experience unemployment at certain times of the year when the demand has decreased. Although unemployment is always problematic, the upside is that seasonal unemployment doesn’t last–eventually, the peak season of a given industry arrives and many workers become employed once again.

Prateek Agarwal
January 14, 2020
Macroeconomics
Inflationary Gap

Otherwise known as an expansionary gap, an inflationary gap is the gap between an economy’s full-employment real GDP and its real GDP. In other words, the inflationary gap refers to the difference (that is, the gap) between the actual gross domestic product (GDP) and the GDP that would exist if the economy were at full employment (this is also known as the “potential GDP”).

Prateek Agarwal
January 07, 2020
Macroeconomics
Discretionary Fiscal Policy

Discretionary fiscal policy refers to government policy that alters government spending or taxes. Its purpose is to expand or shrink the economy as needed. For instance, when the UK government cut the VAT in 2009, this was intended to produce a boost in spending.

Prateek Agarwal
December 16, 2019
Macroeconomics
Supply Side Economics

Supply Side Economics involves policies aimed at increasing aggregate supply (AS), a shift from left to right. They are based on the belief that higher rates of production will lead to higher rates of economic growth.

Prateek Agarwal
November 23, 2019
Macroeconomics
Nominal Interest Rate

The nominal interest rate is the interest rate that has not yet had inflation accounted for in the overall number. This interest rate will be quoted on things like loans, bonds, and the like. It is the rate “as advertised,” which will not necessarily reflect the reality of how the interest rate will actually manifest as influenced by inflation, compounding interest, taxation, fees, and other such factors.

Prateek Agarwal
November 05, 2019
Macroeconomics
Real Interest Rate

The real interest rate is found by adjusting a standard interest rate so that the effects of inflation are not present. This allows you to understand the interest rate better by revealing the true yield of lenders and investors as well as the true cost of funds for borrowers.

Prateek Agarwal
November 04, 2019
Macroeconomics
The Lorenz Curve

One of the five major and common macroeconomic goals of most governments is the equitable (fair) distribution of income, which is a crucial element of a functioning democratic society. With regard to this macroeconomic goal, the distribution of income or wealth in an economy is represented by a Lorenz curve.

Prateek Agarwal
October 22, 2019
Macroeconomics
The Gini Coefficient

The Gini coefficient, or Gini index, is derived from the Lorenz curve, and like the Lorenz curve, it measures the degree of economic equality across a given population and simplifies this reality into a single number.

Prateek Agarwal
October 22, 2019
Macroeconomics
Types of Taxes

There are three main types of taxes, each with very different properties: progressive, proportional, and regressive. This article will describe the most important details of each of these systems.

Prateek Agarwal
September 30, 2019
Macroeconomics
Regressive Tax

A regressive tax is one that is applied so that the rate of taxation decreases for those who earn higher incomes (so that the rich pay a smaller percentage of their income in taxes than the poor).

Prateek Agarwal
September 21, 2019
Macroeconomics
Proportional Tax

A proportional tax is a kind of income tax wherein all taxpayers are taxed at the same percentage rate, no matter how high or low their income. A proportional tax system means that everyone experiences the same tax rate, whether low, middle, or high-income.

Prateek Agarwal
September 08, 2019
Macroeconomics
Progressive Tax

A progressive tax involves taxing lower-income citizens at a lower rate than higher-income citizens. As a member of a society with a progressive tax, the tax rate you are placed in is based on your income—whether you can afford to pay a certain tax level. Higher-income earners have a greater percentage of their wealth and income taxed.

Prateek Agarwal
September 02, 2019
Macroeconomics
Crowding Out Effect

The crowding out effect is a prominent economic theory stating that increasing public sector spending has the effect of decreasing spending in the private sector. In other words, according to this theory, government spending may not succeed in increasing aggregate demand because private sector spending decreases as a result and in proportion to said government spending.

Prateek Agarwal
August 12, 2019
Macroeconomics
Circular Flow Model

The circular flow of income is illustrated in the circular flow model of the economy, which is one of the most significant basic models within economics. This model shows how different units in an economy interact, breaking things down in a highly simplified manner.

Prateek Agarwal
August 05, 2019
Macroeconomics
Say’s Law

Say’s Law is short for “Say’s Law of Markets,” which states that the production of goods produces its own demand. In other words, supply creates its own demand.

Prateek Agarwal
July 22, 2019
Macroeconomics
Aggregate Demand

Aggregate demand (AD) is the total demand for final goods and services in a given economy at a given time and price level.

Prateek Agarwal
July 18, 2019
Macroeconomics
The Multiplier Effect

The Multiplier Effect is defined as the change in income to the permanent change in the flow of expenditure that caused it. In other words, the multiplier effect refers to the increase in final income arising from any new injections.

Prateek Agarwal
July 04, 2019
Macroeconomics
Money Multiplier

The money multiplier describes how an initial deposit leads to a greater final increase in the total money supply. Also known as “monetary multiplier,” it represents the largest degree to which the money supply is influenced by changes in the quantity of deposits. It identifies the ratio of decrease and/or increase in the money supply in relation to the commensurate decrease and/or increase in deposits.

Prateek Agarwal
July 01, 2019
Macroeconomics
The Fisher Effect

The Fisher Effect demonstrates the connection between real interest rates, nominal interest rates, and the rate of inflation. According to the Fisher Effect, the real interest rate is equal to the nominal interest rate minus the expected rate of inflation.

Prateek Agarwal
May 23, 2019
Macroeconomics
Duopoly

A duopoly is a kind of oligopoly: a market dominated by a small number of firms. In the case of a duopoly, a particular market or industry is dominated by just two firms.

Prateek Agarwal
April 15, 2019
Macroeconomics
Laffer Curve

The Laffer Curve was conceptualized for modern economies by Arthur Laffer during a meeting in which he argued against President Gerald Ford’s tax increase. The Laffer Curve shows the relationship between tax revenue collected by the government and tax rates paid by citizens.

Prateek Agarwal
January 10, 2019
Macroeconomics
Consumer Price Index (CPI)

The Consumer Price Index (CPI) is usually represented by a basket of goods or products. It measures the average change in the price of this basket of goods over a defined period of time. Economists and Policymakers widely use the Consumer Price Index as a measurement for the inflation rate.

Prateek Agarwal
December 18, 2018
Macroeconomics
Marginal Revenue

Marginal Revenue (MR) is the increase in the Total Revenue (TR) that is gained when the firm sells one additional (marginal) unit of that product. In other words, MR is the revenue obtained from the last unit sold.

Prateek Agarwal
July 30, 2018
Macroeconomics
Marginal Propensity to Consume

The marginal propensity to consume (MPC) is the increase in consumer spending due to an increase in income. This can be expressed as ∆C/∆Y, which is a change in consumption over the change in income.

Prateek Agarwal
June 22, 2018
Macroeconomics
Deflation

Deflation is defined as the decrease in the average price level of goods and services. It means a general decrease in consumer prices and assets, but the increase in the value of money. If the inflation rate is negative, i.e., below 0%, then the economy is experiencing deflation.

Prateek Agarwal
May 15, 2018
Macroeconomics
Demand Pull Inflation

Demand Pull Inflation involves inflation rising as real Gross Domestic Product rises and unemployment falls, as the economy moves along the Phillips Curve. Demand Pull Inflation is commonly described as “too much money chasing too few goods”.

Prateek Agarwal
April 26, 2018
Macroeconomics
Liquidity Preference Theory

The Liquidity Preference Theory says that the demand for money is not to borrow money but the desire to remain liquid. In other words, the interest rate is the ‘price’ for money.

Prateek Agarwal
February 14, 2018
Macroeconomics
5 Macroeconomic Goals

Every country has macroeconomic goals that it wants to achieve; these goals or objectives are key to ensuring long-term stable economic success. These are the five main macroeconomic goals that most central banks aim to achieve.

Prateek Agarwal
January 15, 2018
Macroeconomics
Aggregate Supply And Demand

Aggregate Supply And Demand provide a macroeconomic view of the country’s total demand and supply curves.

Prateek Agarwal
August 20, 2017
Macroeconomics
The Accelerator Effect

The Accelerator Effect, a Keynesian concept, is used to explain the level of investment in an economy. The accelerator effect refers to a positive effect on private fixed investment of the growth of the market economy.

Prateek Agarwal
August 14, 2017
Macroeconomics
Bimetallism

Bimetallism is a monetary standard in which the value of the monetary unit is equivalent to a certain quantity of gold and to a certain quantity of silver. Such a system establishes a fixed rate of exchange between the two metals.

Prateek Agarwal
August 14, 2017
Macroeconomics
Monetary Policy

Monetary Policy involves the country’s central bank controlling the interest rate and money supply. Monetary policy affects Aggregate Demand (AD), and an expansionary monetary policy increases AD, while a contractionary monetary policy decreases AD.

Prateek Agarwal
August 08, 2017
Macroeconomics
The Natural Rate of Unemployment

The Natural Rate of Unemployment (NRU) is the rate of unemployment after the labor market is in equilibrium, when real wages have found their free-market level and when the aggregate supply of labor balanced with the aggregate demand for labor.

Prateek Agarwal
August 07, 2017
Macroeconomics
The Pigou Effect

The Pigou effect is an economics term that refers to the stimulation of output and employment. Increasing consumption causes this because of a rise in real balances of wealth, particularly during deflation.

Prateek Agarwal
August 04, 2017
Macroeconomics
Aggregate Demand and Aggregate Supply Equilibrium

The Aggregate Demand and Aggregate Supply Equilibrium provides information on price levels, real GDP, and changes to unemployment, inflation, and growth as a result of new economic policy.

Prateek Agarwal
August 02, 2017
Macroeconomics
The Phillips Curve

The Phillips Curve showed that there was a trade-off between the inflation rate and the unemployment rate. Alban Phillips based the original work on data from the UK from 1861-1957.

Prateek Agarwal
August 02, 2017
Macroeconomics
Demand Side Policies

Demand Side Policies are attempts to increase or decrease aggregate demand to affect output, employment, and inflation. Demand Side Policies can be classified into fiscal policy and monetary policy.

Prateek Agarwal
August 01, 2017