Macroeconomics- A Brief History

Macroeconomics descends from two areas of research: business cycle theory and monetary
theory. Monetary theory dates back to the 16th century and the work of Martin de Azpilcueta, while
business cycle analysis dates from the mid 19th.

Modern macroeconomics can be said to have begun with Keynes and the publication of his book The
General Theory of Employment, Interest and Money in 1936. In general, early theorists believed
monetary factors could not affect real factors such as real output, but John Maynard Keynes attacked
some of these "classical" theories and produced a general theory that described the whole economy in
terms of aggregates rather than individual, microeconomic parts. He noticed the tendency for people
and businesses to hoard cash and avoid investment during a recession. He argued that this invalidated
the assumptions of classical economists who thought that market is always clear, leaving no surplus of
goods and no willing labor left idle. Keynes expanded on the concept of liquidity preferences and built a
general theory of how the economy worked. Keynes's theory was brought together both monetary and
real economic factors for the first time, explained unemployment, and suggested policy achieving
economic stability.

Macroeconomics (from the Greek prefix makro- meaning "large" and economics) is a branch
of economics dealing with the performance, structure, behavior, and decision-making of an economy as
a whole. This includes regional, national, and global economies.

Macroeconomics encompasses a variety of concepts and variables, but there are three central topics for
macroeconomic research. Macroeconomic theories usually relate the phenomena of output,
unemployment, and inflation. Outside of macroeconomic theory, these topics are also important to all
economic agents including workers, consumers, and producers.