Fundamentals of Macroeconomics

Fundamentals of Macroeconomics

Fundamentals of Macroeconomics

Macroeconomics is the field of economics that deals with the structure, performance, behavior and the decision making in an economy rather than that of individual markets. Here, firms and households interact in two markets, the factors and the goods market.

In the goods market, firms produce goods which the households purchase. In the factors market, households sell factors of production to the firms. The government lies somehow in the middle, firms and households pay taxes to it while it provides public amenities.

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However, due to the massive layoffs, firms stand to make savings. Mankiw (2012) however explains that these saving will only be experienced in the short-run as the company will recover and be unable to grow due to lack of optimum factors of production.

Based on the above discussion, it is clear that the fundamental elements of macroeconomics are interdependent. All the three economic activates affect all three elements. The paper is left to conclude that no element in the hypothetical system that is the perfect economy, no element can exist in its optimal form without the existence of one or both of the other two elements.

References
Mankiw, G. N. (2012). Principles of macroeconomics. Mason: South-Western Cengage Learning.

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