Economists study macroeconomics as a way to understand how the world works, and how to analyse any country’s economy . In other words, in contrast to microeconomics, which analyses a consumer or a firm’s economy, macroeconomics analyses the economy as a whole. Therefore, to understand how the economy of a country works, we must understand various macroeconomic indicators, as well as national accountings (used to measure a country’s growth), unemployment rate, inflation, etc.
In this Learning Path, we’ll see the basic concepts needed to start studying any country’s economy. Even though the analysis should start by assuming either a closed or open economy, this LP omits such concepts, and gives just the very basic notions required to study macroeconomics. Think of this LP as an introduction to all other LPs in our series on Macroeconomics.
An introduction:
Macroeconomics, a basic definition of what it is;
Circular flow diagram, an easy way to understand how an economy works.
GDP and its components:
Gross domestic product, what it measures and why it’s so important;
Consumption, the main component of GDP;
Investment, which is volatile and unpredictable;
Government spending, and ways in which it is used;
Net exports, which considers exchanges between the economy and the rest of the world.
