Thursday, 18 May 2017


A macroeconomics is a branch of economics that studies how the aggregate economy behaves. In macroeconomics, economy-wide phenomena are examined such as inflation, price levels, rate of economic growth, national income, gross domestic product (GDP), and changes in unemployment.

The focus of the deliberations of the economic science in the period Before the great depression is an individual's behavior in order to achieve balance. For analysis of health ¬ public balance (Senoal equilibrium), With these models, economists are convinced that the future economy will be hit. In the long run every performer engaged in the process of economic exchange through market mechanisms will gain an advantage. The position of each individual's balance was further improved resulting in  people in the economy the more prosperous and fair. .. Prosperity arises due to increasing human productivity. While the productivity of improve there is the fruit of the ¬ competition that forces the humans do specialties.


However, this does not mean the world will never experience a problem in the process of economic exchange. For example, until a certain boundaries will happen an excess supply of labor that resulted in unemployment. Of course this unemployment can lead to recession. But it will never happen malaise that is common and long-term (general gait), because the mechanism of the market will make corrections independently (self correcting), so that the economy will recover as it was before.


Unfortunately the great depression (treat Depression) disperse confidence in the classic Economic hypotheses. Because of the great depression occurred in a long period of time and cause major problems. For example, in the United States the Great Depression period seismic unemployment levels reach over 25.10 labor force, output decreased about contributing half the economy, while investment levels declined sharply.

Luckily in the precarious circumstances as above, a United Kingdom Economist, John Maynard Keynes, contending to improve the situation through his book The General Theory of Employment, Interest and Money, which was published in 1936. In his book, better known as The General Theory, Keynes convey two things staple. The first is a scholarly critique of classical hypothesis of the truth about the efficacy of the mechanisms of the market that is held since the days of Adam Smith.

According to Keynes, the weakness of the Classical Theory is weak assumptions about markets that are considered too idealistic (a utopian scheme) and economic problems too he emphasized pads side deals. With regard to the criticisms, Keynes delivered a second unified in the form of a proposal for a recovery by entering government role in the economy in order stimulate side request.

Second unified Keynes mentioned above brings some updates in radical economics. The first, started the global dimension of he noticed or aggregate (macro) in the analysis of economic science. Thus economic science has developed into the science of macroeconomics. Second, the inclusion of the role of Government in economic sciences analysis has raised the importance of the role of policy analysis (policies analysis). Third, with the need for policy analysis is considered, then the perceived need for the empiric studies. Thus changes/methodology refinement in economic analysis, of the deductive method relies solely on being the inductive method using jugs. Not overboard if Keynes was honored as the father of macroeconomics, as well as the pioneer of inductive studies Economist.


In the vocabulary of Economics, a balance referred to as ' equilibrium ', being equal, a State when the supply and demand curves meet at a point. When the condition of equilibrium is not reached or market failure occurs, it will be incurred losses will be experienced by market participants, whether producers or consumers can also cause dead weight loss, as well as allowing the Government to obtain the additional prosperity of market conditions allow.

In the historical development of the world economy, happen imbalances that resulted in big economic fluctuations, suffering massive unemployment ensued, and a very significant revenue decline in the great became known as the bitter history in economy the world "Great Depression" in the year 1930 's. In conditions of an economy that suffered shocks, then many economists to question about the accuracy and capability of classical economic theory in the face of the condition of the economy was bad. From a classical point of view expressed that national income depends on supply factors and the availability of technology, which in fact did not change substantially from the year 1929-1933.

Then in 1936, United Kingdom Economist named Keynes did a revolution against the economic science by publishing The General Theory of Employment, Interest and Money. Keynes gives a choice alternative to the theory of classical economics. According to Keynes's view that Aggregate Demand (AD) is responsible for the low income and the high rates of unemployment as characteristics of the economic downturn. Criticism against classic is classic Keynes assumes only the Aggregate Supply (AS) from the capital, labor, and technology that is the national income, but did not consider the request.


So to reach the point of balance then combined between aggregate demand and aggregate supply. In the long run prices are flexible and offer to determine the aggregate income. But in the short term is not so, because the price of is nature rigid so that the determination of the revenue side of the aggregate demand. So the classical theory can be seen with the concept of long run equilibrium always happens and the economy experienced growth, while Keynes with short-term balance isn't happening as it did in the classic, aka tone fluctuations in economy.

  • The difference of classical and Keynesian money market against them having a different view. According to the classical function of money as a means of transaction, while according to the view of Keynes function of money is a tool or medium transactions and storing the value of wealth. Where the request for money for the deal is money Kartal + money demand.
  • The difference of classical and Keynesian against interest rates according to the classic view of the <, determination of interest rates occurred in the market goods (loanable fund theory), while according to Keynes, the determination of interest rates occurred in the money market (preferred liquidity).

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