We turn now to macroeconomics. This will be the subject for the second half of the book. As we have already seen, microeconomics focuses on individual markets. In macroeconomics we take a much loftier view. We examine the economy as a whole. We still examine demand and supply, but now it is the total level of spending in the economy and the total level of production. In other words, we examine aggregate demand and aggregate supply.
In particular, we will be examining four key issues. The first is national output. What determines the size of national output? What causes it to grow? Why do growth rates fluctuate? Why do economies sometimes surge ahead and at other times languish in recession?
The second is employment and unemployment. What causes unemployment? If people who are unemployed want jobs, and if consumers want more goods and services, then why does our economy fail to provide a job for everyone who wants one?
Then there is the issue of inflation. Why is it that the general level of prices always seems to rise, and virtually never to fall?
Finally there is the issue of a country’s economic relationships with the rest of the world. What determines the level of its imports and exports? What determines the rate of exchange of its currency into other nations’ currencies? How do these relationships with other countries affect the domestic economy?
