Macroeconomics is the study of the entire economy in terms ofthe total amount of goods and services produced, total income earned, the level of employment of productive resources, and thegeneral behavior of prices. Macroeconomics can be used to analyse how best to influence policy goals such as economic growth , price stability , full employment and theattainment of a sustainable balance of payments.
Until the 1930s most economic analysis concentrated on individual firms andindustries. With the Great Depression of the 1930s, however, andthe development of the concept of national income and product statistics, the field of macroeconomics began to expand.Particularly influential were the ideas of John MaynardKeynes , who used the concept of aggregate demand to explainfluctuations in output and unemployment. Keynesian economics is based on his ideas.
One of the challenges of economics has been a struggle to reconcile macroeconomic and microeconomic models. Starting in the 1950s, macroeconomists developed micro-based models of macroeconomicbehavior (such as the consumption function ). Dutch economist Jan Tinbergen developed the first comprehensive national macroeconomic model , which he first built for the Netherlands and later applied to the United States and the United Kingdom after World War II . The first global macroecomomic model, Wharton EconometricForecasting Associates LINK project, was initiated by Lawrence Klein and was mentioned in his citation for the Bank of Sweden Prize in Economic Sciences in Memory ofAlfred Nobel in 1980 .
Theorists such as Robert Lucas Jr suggested (in the 1970s) that atleast some traditional Keynesian macroeconomic models were questionable as theywere not derived from assumptions about individual behavior. However, New Keynesian macroeconomics has generally presented microeconomic models to shore up theirmacroeconomic theorizing, while the Lucas critique has fallen from favor.
Today the main schools of macroeconomic thought are as follows:
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