Macroeconomics

MACROECONOMICS
In the 1930s one of the world’s strongest economies suffered a devastating collapse. It was the American economy, and the disaster was the Great Depression.
In other words, governments had to have an understanding of macroeconomics.

There are some different aspects between microeconomics and macroeconomics. Microeconomics looks at supply and demand for a single product or industry, macroeconomics follows supply and demand patterns for the whole economy

MACROECONOMICS IS NOT ONLY ABOUT KNOWING WHAT’S HAPPENING IN THE ECONOMY
After the great depression governments realized that an economy needs to be managed. They aim to have steady growth, to control inflation, and to avoid recessions.
Despite the difficulties, they have special mechanisms which help them to do this.

FISCAL POLICY
The first mechanism is fiscal policy. Fiscal policy refers to government spending and to the tax system.
With the help of these two mechanisms, governments can have a huge effect on the growth of the economy.

MONETARY POLICY
The second of these mechanisms is monetary policy. With its monetary policy, a government sets interest rates and also controls the amount of money that circulates in the economy.
These interest rates have a big impact on the economy.

ADMINISTRATIVE APPROACH
The third mechanism is administrative approach. This is a range of things that governments do to increase the supply of goods and services to the economy but without increasing prices.
There are a number of ways governments try to do this.