Economic analysis that deals with economy as a whole.
Two levels of analysis exist by which economists may derive laws concerning economic behavior—macroeconomics
and microeconomics. The level of macroeconomics deals
with the economy as a whole or with its basic subdivisions or
aggregates such as the government, household, and business
sectors. An aggregate consists of a collection of specific economic units, such as businesses, which are treated as if they
were one unit—high-tech industries, for example. In dealing
with aggregates, macroeconomics is concerned with obtaining an overview or general outline of the structure of the
economy and the relationships among its major aggregates.
Macroeconomics entails discussions of the magnitudes of
total output, total level of employment, total income, total expenditures, general level of prices, and so forth, in analyzing
various economic problems.
Unemployment and inflation are important factors that
lead to macroeconomic instability. The United States seeks
economic growth, full employment, and stable price levels.
The broad spectrum of American economic history reflects
remarkable economic growth: technological progress, rapid
increases in productive capacity, and a standard of living that
is a strategic facet of the dynamic character in the U.S. economy. The U.S. economy has been characterized by fluctuations (also called cycles) in national output, employment,
and the price level. In addition, unanticipated inflation tends
to arbitrarily redistribute income at the expense of fixedincome receivers, creditors, and savers. If inflation is anticipated, individuals and businesses may be able to take steps to
mitigate or eliminate its adverse distributive effects.
Economists and researchers use economic models that
help them understand why prices rise or fall, what causes unemployment, why shortages or surpluses of products occur,
and so on. However, more importantly, economists view
economic theory as the basis for economic policy. Further,
economic principles attempt to prove models of reality and
hence are abstract—their usefulness depends upon this abstraction. Nonetheless, it is not a simple matter to create specific policies designed to achieve the broad economic goals of
the U.S. economy. Economic principles are particularly valuable as predictive devices; they are the bases for the formulation of economic policy designed to solve problems and control undesirable events.
—Albert Atkins
References
Stigler, George J. The Theory of Price. New York: Macmillan,
1947.