Growth and Cycle: The red line would be "sustainable growth." The variations around the line would reflect boom and bust cycles around the trend.


The study of the economy as a whole. Macroeconomics is primarily concerned with two subjects:

  • Business Cycle: the short-run fluctuations in output
  • Economic Growth: some measure of the long-run trend in the economy [1]

Good Macro-Descriptive Material Should Include:[]

1. Definition

2.Division into sub-subjects:

econometrics, modeling for representation of system, macroeconomic history, macroeconomic theory and analysis, macroeconomic schools of thought, macroeconomic policies by governments, poverty, unemployment, circulation of money, banking, development of a nation's macro-social system.

3. References to subjects that are related to above.

The following are micro-economic subjects and are strictly out of place. [2]

  • “explanation why variations in the number of hours worked should take the form of layoffs rather than work-sharing”
  • “why layoffs tend to be concentrated among certain parts of the labor force”
  • “why investment in general, and inventories and construction in particular, should be so volatile”


The idea that there is a overal system can be traced back to Francois Quinsay (part of the Physiocrats, an early group of political economists) who saw the overall economy functioning like a body (he was also a physician). Adam Smith's book: An Inquiry into the nature and Causes of the Wealth of Nations described a reason that mercantilism (which followed the Physiocrats) could be discretited in favor of understanding the interactions of human level descriptions of the economy. These views would come to be know as representing the Classical Economists

With the "Great Depression" (and to some extent the Bismarkian approach 1880's - WWI) the consensus opinion seemed to be that Governments could intervene and create more desirable outcomes within their political domains. Debate has since centered on the validity of various and diverse approaches as to the effect of the Government's policies. Among the schools of thought are:

Unresolved issues in Macroeconomics:[]

[3] 13 key policy issues (unresolved)

  1. Do budget deficits matter
  2. Trade deficit
  3. Interest rate bubble (is there a bubble?) See also Equity Premium Puzzle
  4. Real estate bubble
  5. Dollar bubble
  6. Labor Market Slack
  7. Monetary policy lack of debate (non-debate) Discretion (wins) over rules? See Discretion vs. Rules
  8. Optimal currency area
  9. What if the price of oil increases?
  10. Social security reform
  11. Economic reform
  12. Japan, recent econ. History of
  13. Demographic shifts


  1. Snowden, Brian and Howard R. Vane: Modern Macroeconomics: Its Origins, Development and Current State Cheltenham, UK, Northhampton, MA Edward Elgar Publishing, Inc., 2005
  2. Greenwald, Bruce and Joseph Stiglitz: “New and Old Keynesians” ‘’The Journal of Economic Perspectives’’ Vol. 7, No. 1. (Winter, 1993), pp. 23-44
  3. Tyler Cowen, Lectures at GMU, Fall 2005
  1. See Snowdon below
  2. (Greenwald and Stiglitz 1993 p. 24)
  3. Tyler Cowen's lectures in Macroeconomics