Macroeconomics

- Overview

Macroeconomics focuses on the performance of economies – changes in economic output, inflation, interest and foreign exchange rates, and the balance of payments. Poverty reduction, social equity, and sustainable growth are only possible with sound monetary and fiscal policies.

The three major macroeconomic issues are unemployment, inflation and economic growth. Macroeconomics helps governments assess the performance of the economy and decide what actions can be taken to increase or slow growth.

- The Federal Reserve and Macroeconomics

The Fed pays close attention to macroeconomics because its goals—maximizing sustainable employment and stabilizing inflation—are measured and achieved at the level of the economy as a whole rather than at the individual level. 

Macroeconomists study the following questions: what causes the business cycle to fluctuate; what drives economic growth up and down; how prices are determined; what is the rate of inflation and what determines it; what is productivity growth; what is the determinant of productivity What? Importantly, macroeconomists also study the role of government in determining the rate of growth, the long-run rate of potential output in the economy, and the rate of inflation. 

The Fed cares about macroeconomics because its goals are identified and defined in macroeconomic concepts: stable inflation or stable prices and maximum employment are measured and achieved at the macroeconomic level of the economy as a whole, not at the individual level level. Because the Fed's goals are macroeconomic goals, it often thinks in terms of macroeconomics.