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 must be made in managing a country’s economy:
· Managing government spending, taxation and borrowing (3.3.8.1);
· Combating recession with an economic stimulus (3.3.8.2);
· Inflation, monetarism and the role of central banks (3.3.8.3);
· Balance of trade and currency exchange rates (3.3.8.4);
· Macroeconomic policy can affect the balance of power between the major economic actors (3.3.8.5).
(This is an archive of a page intended to form part of Edition 4 of the Patterns of Power series of books. The latest versions are at book contents).