Macroeconomics Essay

Macroeconomics Essay

Macroeconomics is concerned with the economy as a whole; with such major aggregates as the household, business, and government sectors, and with measures of the total economy. The central idea that will be discussed is the essay will be the income-consumption relationship. One may ask what will happen if one decide to save their money in their house and not in bank? Secondly One may also ask be concern with the consumption schedule and the saving schedule and how will that affect the market as a whole? In closing without one’s understanding of the income-consumption then one will not understand the flow of macroeconomics.

Macroeconomics stated by the book is the part of economics concerned with the economy as a whole; with such major aggregates as the household, business, and government sectors, and with measures of the total economy. The two concepts underlying all questions of macroeconomics are scarcity and opportunity cost. The key statistics for understanding the health and trajectory of economy are Gross National Product; aggregate supply and demand; unemployment; inflation; and monetary and fiscal policy. Macroeconomics is the study of how firms work in relation with consumers and suppliers. Macroeconomic stresses the assumption of purposeful behavior and comparisons of marginal benefit and marginal cost.

The central idea is income-consumption relationship which reflects the direct consumption-disposable income relationship.  Economists define personal saving as “not spending”.  The first graph shows the relationship of consumption and saving schedules and propensities to consume and save. The graph depicts the consumption and disposable income for the years 1987-2009. Each dot on the graph shows consumption and disposable income in a specific year.

One may ask what will happen if one decides to save their money in their house instead of putting their money in the bank how ill that effect the consumption schedule?  One may ask why one must be concern about the consumption schedule and the saving schedule. The following reflects the opinion of the writer of this essay which is one may ask why one must be concern about the consumption schedule and the saving schedule.   Because the income-consumption relationship is the vital part of macroeconomics this concept puts the theories and ideas to work in macroeconomics. Without understanding the income-consumption then one may not understand the principal of macroeconomics.