Answer :
Macroeconomic study focuses on broad economic factors affecting a nation's economy, aiming for goals like economic growth, low unemployment, and low inflation. Criticisms of GDP include neglecting income distribution, environmental impacts, and quality of life aspects, leading to alternative indexes like HDI, GPI, and HPI. Governments manage macroeconomic challenges using fiscal and monetary policy tools.
The focus of macroeconomic study is on the large-scale economic factors and behaviors that affect a country's economy as a whole. This discipline addresses various national and global economic systems, analyzing how these systems interrelate and affect the overall economic environment. The macroeconomic goals include:
- Economic growth
- Low unemployment
- Low inflation
To assess the health of an economy regarding these goals, general targets include a positive and sustainable rate of economic growth (often around 2-3% for developed economies), an unemployment rate that reflects "full employment" (usually around 4-5%), and an inflation rate that is stable and not eroding purchasing power (targeted around 2%).
One of the main criticisms of the GDP growth rate as a measure of economic success is its inability to account for the distribution of income, environmental degradation, and non-market transactions such as household labor. It also does not measure the sustainability of growth or quality of life improvements.
Three alternative indexes of economic success include:
- The Human Development Index (HDI)
- The Genuine Progress Indicator (GPI)
- The Happy Planet Index (HPI)
The frameworks economists use to analyze the macroeconomy include examining aggregate supply and demand, fiscal and monetary policies, and international trade and finance. Governments can manage the macroeconomy using two main policy tools, which are fiscal policy (government spending and tax decisions) and monetary policy (central bank actions on interest rates and the money supply).
