3.3.8   Macroeconomic Management

(This is an archived page, from the Patterns of Power Edition 3 book.  Current versions are at book contents).

Macroeconomic policies are those that affect the economy as a whole.  Samuelson and Nordhaus, in chapter 21 of Economics, explain both the scope and importance of macroeconomics:

“Thanks to Keynes and his modern successors, we know that in its choice of macroeconomic policies – those affecting the money supply, taxes, and government spending – a nation can speed or slow its economic growth, trim the excesses of price inflation or unemployment from business cycles, or curb large trade surpluses or deficits.” [p. 381]

Macroeconomics is a contested subject.  It is not possible to precisely calculate the impact of policy decisions: there are doubts about the accuracy of both current and historical data, there are disagreements about their interpretation, and the world is continually changing – which makes forecasting difficult.  Difficult judgements have to be made in choosing the best policy:

·     Managing government spending, taxation and borrowing (;

·     Responding to the economic cycle with a stimulus (;

·     Inflation, monetarism and the role of central banks (;

·     Balance of trade and currency exchange rates (;

·     Macroeconomic policy can affect the balance of power between the major economic actors (