Macroeconomics involves the relationships of large groups and outcome at the aggregate level. What happens to all consumers, all companies and all workers? Measurements of macroeconomic activity include Gross Domestic Product, aggregate unemployment and the inflation rate.
Failure to repay by millions of individuals leads to a financial crisis.
In our human effort to control our destiny, we are not satisfied to simply watch and predict the future macroeconomic environment. We try to control the outcome.
In the aggregate, what is the economy doing and what can be done to make the economy better for everyone combined (even though, individually, some might be better off and others might be worse off)?
There are fundamentally different views on how to make this happen. Should there be a focus on stimulating the economy through lower taxes, less regulation and more exports? Or should there be an increase in government spending to ensure that demand does not fall?
In the most simplistic view, the first approach encourages more activity, which leads to more goods and services being created. This results in a bigger pie for all to enjoy.
The second approach focuses on making sure there is enough money still being circulated to buy the goods and services currently being produced. This results in changing the size of the slices of the same-size pie.
So, while pundits and politicians might confuse us with complex words and theories, we have to meld these with reality. With more than 20 million people unemployed or underemployed, we would be much better off if more people were working, either hired by others or inspired to go out on their own to create their own jobs, possibly employing others along the way. For this to happen, regulation would have to be cut, making it easier for startups to operate, encouraging those on the margin to take a chance.
In the end, we have to decide whether it makes more sense to argue about the size of the slice or try to make the whole pie larger.
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