Macroeconomics can best be explained as the general study of behaviors, structure, and decision- making and performance dealings; summing up the economy as a whole. Macroeconomics determines price level, inflation, changes in unemployment and the general output or income for a particular country’s economy (Krugman, 2011,).
The effects on a county’s macroeconomics activities can be either positive or negative. This depends on the economy's current state and the government initiative to control the economic activities to avoid cases of say unemployment and inflation. Too much money in circulation increases the purchasing power of individual citizens, but at the same time, it may lead to inflation: a state where money loses value. In such a scenario, the government should bring in countermeasures to control this move. The government can decide to sell certain assets including government bonds and securities. If people buy these bonds, the money in circulation reduces in a great margin. Similarly in the case of a contractionary economy, the government through the central bank can reduce the interest rates. This will call for commercial banks to give loans to individual citizens at low-interest rates. The effect will be an increase in the circulation of money. This economic behavior is very important for any economy.
Macroeconomics can also greatly influence the employment and unemployment rates. If a large number of people with adequate work skills are not working, instead they are continuously searching for jobs, the condition is known as unemployment. Unemployment can be as a result of poor government structure or a general mismatch of individual’s work skills and the skills needed for the particular jobs. This can happen when there is a transition of the market labor job skills. At the time when people are forced to acquire the necessary skills, they are rendered jobless. This can ruin the economic growth in the long run.
The aggregate demand and supply for goods and services explain more of the price level. The real balance effect or pigou theory states that when real income falls, the real wealth consequently increases (Harrod, 1934). The effect here is that consumers are able to demand more goods. In this case, it is evident that the vice versa is also true. Another economic scholar-Keynes argues that when the price of goods and services fall, the demand for money declines to cause a decline in the interest rates. Consequently borrowing for investment and consumption increase.
National income constitutes of everything the nation produces. It can also be termed as the output for the nation. From the production side, an output can be said to be the total value of final goods produced. This income can be characterized by an efficient human capital, an increase in the use of technology, better education, besides accumulation of good machinery. Gross domestic product (GDP) is a measure of macroeconomics output: one of the national accounts. A greater national’s output can result in an increase in export of the goods and services produced. This can have an international effect on other countries’ economy in terms of trade.
In this regard, macroeconomics variables should be well calculated for the general wellbeing of any particular economy. The theories of macroeconomics such as inflation and unemployment may have a direct or indirect effect on the economic agents of economic growth. These agents such as workers, producers, and even consumers have to be greatly protected. Any government should encourage multiplier effect concept in most of the projects it undertakes. Moreover, the wealth of the nation depends on the macroeconomics theories and undertakings.
References
Harrod, R. F. (1934). Professor Pigou's Theory of Unemployment. The Economic Journal,44(173), 19. doi:10.2307/2224724
Krugman, P. (2011, August 23). Businessmen and Macroeconomics - The New York Times. Retrieved from http://krugman.blogs.nytimes.com/2011/08/23/businessmen-and-macroeconomics/?_r=0
