bilet 3

Topics: Monetary policy, Inflation, Economics Pages: 3 (1015 words) Published: November 12, 2014
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WHAT IS MACROECONOMICS?
Macroeconomics provides us with a bird's-eye view of a country's economic landscape. Instead of looking at the behavior of individual businesses and consumers—called microeconomics—the goal of macroeconomics is to look at overall economic trends such as employment levels, economic growth, balance of payments, and inflation. The study of the world economy, for example, is essentially a macroeconomic survey. Just as the speed of an engine is regulated by its supply of fuel, macroeconomics is influenced mainly by monetary policy, which controls a nation's money supply, and fiscal policy, which controls a government's revenue and spending. Control over an economy is essentially in the hands of each country's central banks and government, because they control the money that provides the fuel to keep the economy running. Monetary policy, the control of a nation's money supply, is managed by each country's central bank. Germany's Bundesbank, Britain's Bank of England, and the Bank of Japan all regulate their money supplies with basically the same goals as the U.S. Federal Reserve: to promote economic growth and keep inflation under control. Just as a driver uses the accelerator to speed up or slow down a vehicle, central banks control the economy by increasing or decreasing the money supply. By carefully regulating the supply of money to fuel economic growth, a central bank works to keep the economy from overheating or slowing down too quickly. Monetary policy is essentially a guessing game. There is not one statistic to tell us how fast an economy is growing, and there is nothing that tells us how quickly the economy will respond to changes that may take months or years to implement. Central banks try to keep one eye on inflation, resulting from an overheated economy, and one eye on unemployment, resulting from economic slowdowns. The economy at large can also be controlled by...
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