PART VI: Macroeconomic Foundations and the Long Run
The Big Picture
It’s time to shift focus from your economy (microeconomics) to see what all those decisions mean for the economy (macroeconomics). As we’ll discover, there’s a close link, because macroeconomic outcomes reflect millions of individual microeconomic decisions. So macro builds on micro, while adding a sharper focus on the interdependence between all of these decisions.
In the chapters ahead, we’ll examine the key measures that are used to assess an economy’s health. Macroeconomics is all about enabling people to live better lives, and so these chapters will focus on the long-run factors that determine whether an economy performs well, or poorly. We’ll start by exploring what gross domestic product is, and why it’s a closely-watched measure of economic health. We’ll then ask what drives economic growth, analyzing why some countries have become rich, while others remain poor. It matters, because insights that raise the growth rate can potentially raise billions of people from poverty. We’ll then turn to unemployment, analyzing what causes joblessness, who it effects, and how costly it can be for society. Finally, we’ll examine inflation and how changes in the overall price level are measured, and what they mean for individuals, businesses, and for the economy overall.