Microeconomics and Macroeconomics

Macroeconomic Models

A macroeconomic model is an analytical tool designed to describe the operation of the economy of a country or a region. These models are usually designed to examine the dynamics of aggregate quantities such as the total amount of goods and services produced, the total income earned, the level of employment of productive resources, and the level of prices.

The goal of a macroeconomic model is to replicate the main mechanisms of an entire economic system, which may consist of a region (such as the Italian Mezzogiorno), a nation state (such as Poland), or a collection of nation states (such as the 27 members of the EU). The only requirement is that the entity being modeled is large enough to display the distinctive properties that are the subject area of macroeconomics. Of course, it is also possible to construct economic models of other entities, such as a town, a transport system, a cluster of firms, the operation of a particular policy program, etc. However, such models fall outside the category of macroeconomic models.

Macroeconomic models may be logical, mathematical, and/or computational; the different types of macroeconomic models serve different purposes and have different advantages and disadvantages.

Macroeconomic models may be used to clarify and illustrate basic theoretical principles; they may be used to test, compare, and quantify different macroeconomic theories; they may be used to produce "what if" scenarios (usually to predict the effects of changes in monetary, fiscal, or other macroeconomic policies); and they may be used to generate economic forecasts. Thus, macroeconomic models are widely used in academia, teaching and research, and are also widely used by international organizations, national governments and larger corporations, as well as by economics consultants and think tanks.

Notes:

tool – инструмент

to replicate – воссоздавать

distinctive properties – отличительные черты, свойства

forecast – прогноз

think tank – экспертно-аналитический центр

Unit 3

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