It answers questions such as 'What causes the economy to grow over time?', 'What causes short-run fluctuations in the economy?' 'What influences the values various economic indicators and how do those indicators affect economic performance?
Macroeconomics can be best understood in contrast to microeconomics which considers the decisions made at an individual or firm level. Macroeconomics considers the larger picture, or how all of these decisions sum together. An understanding of microeconomics is crucial to understand macroeconomics. To understand why a change in interest rates leads to changes in real GDP, we need to understand how lower interest rates influence decisions, such as the decision of how much to save, at the firm or household level. Once we understand how an individual, on average, will change their behavior we will then understand the large scale relationships in an economy.
The study of whole economic systems aggregating over the functioning of individual economic units. It is primarily concerned with variables which follow systematic and predictable paths of behaviour and can be analysed independently of the decisions of the many agents who determine their level. More specifically, it is a study of national economies and the determination of national income."
Two of the most fundamental elements macroeconomists study are the total output of an economy (GDP) and the cost of living within an economy (CPI).
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