Macroeconomics: An Overview

Macroeconomics deals with the performance of the economy as a whole. It seeks to explain how the economic aggregates which describe the economy's overall performance are determined, why problems regarding this performance occur, and what the government should do to alleviate the problems. Unemployment and inflation are the most important macroeconomic problems. General monetary and fiscal policies are the most important government problem-solving instruments.

For the United States, the most severe unemployment and inflation problems of the past half century occurred during the Great Depression of the 1930s and during World War 11 and its aftermath. The most severe problems since these events have occurred during the 1970s.

Modem macroeconomists for the most part accept the Keynesian view that aggregate demand for output relative to full-employment output is the key factor in unemployment and inflation. They differ with Keynes and among themselves as to the chief source of fluctuations in aggregate demand, the extent to which discretionary policies should be used, and whether monetary or fiscal policies should be emphasized.