Macroeconomics studies the economy as a whole; it looks at
the aggregate outcomes of all the decisions that consumers, firms, and the
government make in an economy. It is about the aggregate variables—for example,
the overall levels of output, consumption. It is also about understanding the
long-term forces that drive the economy and shape the business environment. It focuses
on the exchange rate (the price of one country’s money in terms of that of
another country) or the interest rate (the price of spending today rather than
tomorrow). Understanding macroeconomics is not simply a useful aspect of the PR
role of the business person; nor is it solely related to better understanding
government policy. The health of a company depends on the macroeconomy.
Macroeconomic events like changes in interest rates, fluctuations in exchange
rates, and shifts in the overall level of stock market prices affect individual
companies. More local events—like a rise in the wages of the company’s
workforce or the bankruptcy of a competitor—are also important. Both these
types of factor—the localized and the general—are uncertain. Economists
distinguish between two types of uncertainty: aggregate and idiosyncratic.
Aggregate uncertainty affects all firms and sectors in the economy;
idiosyncratic uncertainty affects only a few firms or industries.
Macroeconomics is essentially about the aggregate sources of uncertainty that
Mar 25th, 2015
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