Macroeconomics Written Assignment Unit 2 PDF

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Written Assignment Unit 2: A Brief History Of Macroeconomic Thought And Policy, And Macroeconomics: The Big Picture University Of The People BUS 1104 Macroeconomics Nathan Rondeau (Instructor)

Macroeconomics is the study of the overall economy or markets which operate on a large scale. Macroeconomics studies the price levels, the rate of economic growth, gross domestic product (GDP), and also the changes in unemployment. Some of the vital questions that relate to macroeconomics are the cause of unemployment, the cause of inflation, and also what creates or stimulates economic growth. Based on this, macroeconomics measures how best or good an economy is functioning and also understand the kind of forces that drive it. According to Erika (2020) “Macroeconomics, as it is in its modern form, is often defined as starting with John Maynard Keynes and the publication of his book The General Theory of Employment, Interest, and Money in 1936. Keynes explained the fallout from the Great Depression when goods remained unsold and workers unemployed. Keynes's theory attempted to explain why markets may not clear. Before the popularization of Keynes' theories, economists did not generally differentiate between micro and macroeconomics. The same microeconomic laws of supply and demand that operate in individual goods markets were understood to interact between individuals markets to bring the economy into a general equilibrium, as described by Leon Walras. The link between goods markets and large-scale financial variables such as price levels and interest rates was explained through the unique role that money plays in the economy as a medium of exchange by economists such as Knut Wicksell, Irving Fisher, and Ludwig von Mises. Throughout the 20th century, Keynesian economics, as Keynes' theories became known, diverged into several other schools of thought”. The similarities and differences between Keynesian and Classical economics are that Keynesian economics was established on the efforts of John Maynard Keynes and this brought about the beginning of the separation between the study of macroeconomics and microeconomics while Classical economics was built or developed based on Adam Smith’s original theories which held on to wages and prices.

How Keynesian would deal with the issues of unemployment is that they would use the increase of tax or the government payout to cuts to shift AD to the left which would bring downward pressure on the price level but with a small deduction in the output or a little rise of unemployment. On the other hand, Classical economists think unemployment which happens in the labor markets or any other capital markets should be classified or be considered as optional unemployment. What new developments starting in the 1980s have changed macroeconomic thought? The new development which started in the 1980s was a very antagonistic contractionary policy that was directed at decreasing inflation. Upon all this, the recession didn’t cease but rather made the inflations rate rise higher and for the inflation to be in control, they needed a more stable economy which would bring an end to it.

Word Count: 472 Reference: Erika, R. (2020). Investopedia: Macroeconomics. https://www.investopedia.com/terms/m/macroeconomics.asp...