Q:

What is the importance of macroeconomics?

A:

The study of macroeconomics offers insight into the way the economy works on a large scale, revealing patterns and relationships that affect its efficiency and health. From a consumer standpoint, understanding these patterns and relationships makes for responsible decision making in areas such as savings, investments and long-term financial planning.

If a person wishes to take out a loan for nonessential home improvements, macroeconomic forces predict and influence changes in interest rates. This kind of information can help that person make an informed decision to wait a few more months before applying for a loan, ultimately saving hundreds of dollars in interest. If someone wants to start her own business, but is concerned about quitting her current job, an analysis of the labor force and supply and demand can support or refute her plan. If her business subsequently doesn't succeed, going back to work for her previous employer might not be an option, especially in a competitive job market.

The federal government, legislators, and financial institutions all rely on an understanding of macroeconomic principles to keep the economy in a state of balance. These include decisions about inflation, the consumer price index, interest rates, and government spending and borrowing. Without these things, establishing order in the economy would prove all but impossible.

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