Macroeconomics studies an overall economy on both a national and international level, using highly aggregated economic data and variables to model the economy. Its focus can include a distinct geographical region, a country, a continent, or even the whole world. Its primary areas of study are recurrent economic cycles and broad economic growth and development.
Topics studied include foreign trade, government fiscal and monetary policy, unemployment rates, the level of inflation and interest rates, the growth of total production output as reflected by changes in the Gross Domestic Product GDP , and business cycles that result in expansions, booms, recessions, and depressions. Micro- and macroeconomics are intertwined. Aggregate macroeconomic phenomena are obviously and literally just the sum total of microeconomic phenomena.
However these two branches of economics use very different theories, models, and research methods, which sometimes appear to conflict with each other. Integrating the microeconomics foundations into macroeconomic theory and research is a major area of study in itself for many economists.
There are many competing, conflicting, or sometimes complementary theories and schools of thought within economics. Economists employ many different methods of research from logical deduction to pure data mining. Economic theory often progresses through deductive processes, including mathematical logic, where the implications of specific human activities are considered in a "means-ends" framework.
This type of economics deduces, for example, that it is more efficient for individuals or companies to specialize in specific types of labor and then trade for their other needs or wants, rather than trying to produce everything they need or want on their own. It also demonstrates trade is most efficient when coordinated through a medium of exchange , or money.
Economic laws deduced in this way tend to be very general and not give specific results: they can say profits incentivize new competitors to enter a market, but not necessarily how many will do so. Still, they do provide key insights for understanding the behavior of financial markets , governments, economies—and human decisions behind these entities.
Other branches of economic thought emphasize empiricism, rather than formal logic—specifically, logical positivist methods, which attempt to use the procedural observations and falsifiable tests associated with the natural sciences. Some economists even use direct experimental methods in their research, with subjects asked to make simulated economic decisions in a controlled environment. Since true experiments may be difficult, impossible, or unethical to use in economics, empirical economists mostly rely on simplifying assumptions and retroactive data analysis.
However, some economists argue economics is not well suited to empirical testing, and that such methods often generate incorrect or inconsistent answers. Two of the most common in macroeconomics are monetarist and Keynesian.
Monetarists are a branch of Keynesian economics that argue that stable monetary policy is the best course for managing the economy, and otherwise often have generally favorable views on free markets as the best way to allocate resources. Economic indicators are reports that detail a country's economic performance in a specific area.
These reports are usually published periodically by governmental agencies or private organizations, and they often have a considerable effect on stocks, fixed income , and forex markets when they are released. They can also be very useful for investors to judge how economic conditions will move markets and to guide investment decisions. Below are some of the major U. It represents the total market value of all finished goods and services produced in a country in a given year or another period the Bureau of Economic Analysis issues a regular report during the latter part of each month.
This is because the final GDP figure is frequently considered a lagging indicator , meaning it can confirm a trend but it can't predict a trend. In comparison to the stock market, the GDP report is somewhat similar to the income statement a public company reports at year-end.
Reported by the Department of Commerce during the middle of each month, the retail sales report is very closely watched and measures the total receipts, or dollar value, of all merchandise sold in stores. Because consumer spending represents more than two-thirds of GDP, this report is very useful to gauge the economy's general direction.
Also, because the report's data is based on the previous month sales, it is a timely indicator. The content in the retail sales report can cause above normal volatility in the market, and information in the report can also be used to gauge inflationary pressures that affect Fed rates. The industrial production report, released monthly by the Federal Reserve, reports on the changes in the production of factories, mines, and utilities in the U. One of the closely watched measures included in this report is the capacity utilization ratio , which estimates the portion of productive capacity that is being used rather than standing idle in the economy.
The Bureau of Labor Statistics BLS releases employment data in a report called the non-farm payrolls , on the first Friday of each month. Likewise, potential contractions may be imminent if significant decreases occur. While these are general trends, it is important to consider the current position of the economy. For example, strong employment data could cause a currency to appreciate if the country has recently been through economic troubles because the growth could be a sign of economic health and recovery.
Economics can be defined in a few different ways. Economics ranges from the very small to the very large. The study of individual decisions is called microeconomics. The study of the economy as a whole is called macroeconomics. Economists have all kinds of jobs, such as professors, government advisors, consultants, and private sector employees.
Using theoretical models or empirical data, they evaluate programs , study human behavior , and explain social phenomena. And, their contributions inform everything from public policy to household decisions. Economics intersects many disciplines. Its applications include health , gender , the environment , education , and immigration. Learning about economic concepts can help you to understand the news, make financial decisions, shape public policy, and see the world in a new way.
If you are a student , you might be wondering about how much economists earn or how to apply to graduate school in economics.
If these companies can still produce the same amount of output with thousands fewer employees, by laying them off they become available to work somewhere else producing MORE for society. BUT, will they find another job? These articles indicate that in today's economy they probably will:. Would it be better for society to have them stay at companies where they are not needed or to be unemployed collecting unemployment compensation or welfare?
I would consider the possibility that it would it be BETTER for society to have them be unemployed collecting unemployment compensation or welfare. Not all layoffs are good for society.
See: lay-offs. If businesses use resources where they are best suited then MORE can be produced from the same amount of resources. Let's say I own a company which employs secretaries and truck drivers. Normally the secretaries type letters and the truck drivers drive trucks. One day I decide to try something new. I had the secretaries drive the trucks and the truck drivers type letters. Hopefully you were thinking "they went up.
Therefore, to be productively efficient and achieve the maximum satisfaction possible from our existing resources we must use resources where they are best suited. Doctors should work in the hospitals and engineers should build the bridges. This would be productively efficient.
More bridges will be built and more lives saved. It would be productively inefficient i. Fewer bridges would be built and fewer lives saved. This would be productively inefficient - a waste of existing resources. Illinois has resources weather, machinery, soil, etc. So it makes sense for Illinois to grow corn and for Alabama to grow cotton since this way we get more corn and more cotton from the same amount of resources. This is productively efficient. But there is just one problem.
In Illinois we have a lot to eat corn but no clothes cotton. And in Alabama they have cotton clothing, but they are staving. So what do we do? We exchange or trade. We in Illinois sell corn to those in Alabama and they sell cotton to us. If we didn't trade then we would have to grow both corn and cotton and Alabama would have do the same.
North Dakota has resources suited to growing potatoes cold climate, good soil, etc. Honduras, in Central America, has resources suited to growing sugar, or sugar cane hot wet climate, poorer soils, etc. So it is productively efficient to grow potatoes in North Dakota and to grow sugar in Honduras. Costs are lower, and more importantly, more can be grown with the existing resources. Why, then, do they grow sugar sugar beets in North Dakota?
The sugar that we get from sugar beets is very expensive. Why do we grow sugar beets in North Dakota when we can get cheap, high quality, sugar from Honduras? The answer has to do with trade. There is free trade between Illinois and Alabama. Free trade means that the government does not try to restrict trade with taxes or other barriers. Therefore, Alabama and Illinois can use their resources where they are best suited and achieve productive efficiency, i.
But there are trade restrictions on sugar between the US and Honduras. This, then, encourages the farmers to be productively inefficient. Free trade, then, is a necessary condition to achieve productive efficiency since it allows resources to be used where they are best suited - regardless of the state, or the country.
Economists have a slightly different view of discrimination. They would ask, "How does discrimination affect the quantity of boats and everything else that are produced with the resources available? By using the technology that minimizes costs, it minimizes the amount of resources used, since it is the resources that make up the costs of production.
For example, in the US farmers use tractors to plow their fields, whereas in the country of Kenya in East Africa most field are plowed by hand. It could be argued that both farmers ARE being productively efficient. In Kenya, tractors, fuel, repairs, etc. Why don't US farmers use "modern" technology and plow their fields with helicopters and laser beams sort of like the Jetsons?
The answer is easy, it would be too costly. There are cheaper, and more productively efficient, ways to get the job done. The second way to use our existing resources to maximize society's satisfaction is allocative efficiency. It would be a waste of our limited resources to produce a lot of things that we don't want and few of the things that we do want.
It would be a waste of our limited supply of steel to produce billions of horseshoes that nobody wants and only a few cars that people do want. This would be allocatively inefficient.
People want more gasoline and very little kerosene. Therefore to use our resources wisely, we should use our crude oil to produce more gasoline and less kerosene. As consumer tastes have moved away from small cars to large Sport Utility Vehicles, an allocatively efficient society would use its resources to produce more SUVs and fewer small cars. This results in surpluses and shortages. Whenever we produce too much surplus or too little shortage we are allocatively inefficient. We are NOT using our resources in a way that would achieve the maximum satisfaction possible.
US and European farmers used to produce mountains of grain that they couldn't sell. Pizza Hut doesn't produce piles of pizza that they cannot sell. Homebuilders do not build hundreds of homes that they cannot sell. Why did US grow more grain than they knew they could sell?
The answer is - the government. More broadly, economic concepts can be applied to understand the logic of complicated data, to see how things relate to each other, and to see the broader context. There are careers that use specific knowledge of economics, for example banks, insurance, accountancy firms, businesses and in government.
These jobs may involve identifying financial risks or making decisions about where a company or a government should invest its resources in the future, or even how to design a bidding platform for eBay. There are also roles for economists in think tanks and consultancies that advise governments and companies on public policy, such as how to deal with the Greek debt crisis.
More broadly, an economics degree helps prepare you for careers that require numerical, analytical and problem solving skills — for example in business planning, marketing, research and management. Economics helps you to think strategically and make decisions to optimise the outcome. Especially in demand are people who have studied Economics and Finance as they are particularly well-prepared for jobs in banking and the financial sector, such as in accountancy firms.
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