Simple English: What is Macroeconomics

What is Macroeconomics?

Macroeconomics is about understanding how the whole economy works. They study stuff like unemployment, inflation, economic output, interest rates and government policies.

An example I would like to give is the economy in Greece. We all know that it isn’t really doing well. How can we tell?

Very important to understand is the following three things:

• GDP: the value of ALL goods and services in a country, in a year. (Does not include stocks, or you buying a car) The USA currently has the highest GDP. So coming back to Greece, Greece has had 6 years of dropping GDP’s. A so called recession. (The good news is, since 2014 the GDP has increased. Yay!)
• Unemployment: Is measured by the unemployment rate. Greece currently has an unemployment rate of 25% ( And this doesn’t even included people who only work a few hours a week! Remember: When the GDP drops, the unemployment grows.

Unemployment rate= (unemployed/number of people that are working)*100

• Inflation: So what is inflation? Inflation is measured by a price going up. So if you you bought a pack of milk at 1€ today, it could be that it costs 1.5€ next year! Let’s just hope that your boss notices this and increased your salary.

Four more things before I let you go. I really hope this isn’t too much information. For a country’s GDP to work, it relies on four more things. Imagine this “things” as little packages that get sent to your shop each day. You need these packages to keep your shop running.

• Package 1 — Consumer spending(Little minions in a box that come and buy the stuff in your shop): The amount of money that is spent by consumers buying goods in the country. (The USA relies on this)
• Package 2 — Business spending (Big minions in a box that buy big stuff in your shop): Businesses buying machines, stocks, or even borrowing money
• Package 3 — Government spending (The money you use to make all the minions feel comfortable in your shop): bridges, schools, hospitals…(Denmark and Sweden are on top here. But so is Zimbabwe. But they’re doing it wrong…)
• Net exports : So you’ve receive a few packages to your mansion, now you’re sending these to Switzerland. They want to buy it for double the value! (Saudi Arabia is a big exporter of oil)

Now imagine you stop receiving a package. You might not be able to run your shop if you rely to much on them.