Last updated: September 20, 2019
Topic: SocietyWar
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Aggregate demand/aggregate supply and the effect of these on employment and the economy are major aspects of macroeconomics. The further interplay of these factors with the Consumer Price Index and inflation and the effect these have on the demand for a country’s money demonstrate the for me importance of the market economy in the global economic health of a country. Economic growth and recessions depend so heavily on aggregate demand and supply that the study of trends and correlations between and among them appear indispensable to the proper management of a country’s economy.

How economies operate in the short run has a bearing on their operations in the long run. However, the volatility of such areas as the stock market, along with other unpredictable or volatile factors (such as war, terrorism, and consumer tastes), do add a layer of uncertainty to the study of macro-economics. In addition to this, an understanding of the differences between real and nominal interest rates, as well as the relationship between these and the rate of inflation proves to be useful information not only to the student of macroeconomics, but also the average person who might be seeking a loan within a given market situation.

What I have found particularly interesting is the idea behind macro-economic efficiency and equilibrium as far as it concerns the interplay of aggregate demand and aggregate supply. It seems an elusive concept in any market where demand and supply are constantly changing. Yet the fact that such an effect could still be identified by a formula underscored, for me, the importance of studying economics on the macro-economic scale. Also interesting is the relationship between efficient markets and profit. One would consider high profit yielding market to be efficient, until one realizes that efficiency tends to benefit consumers more—so that supernormal profit is not a necessary criterion—rather, it is a sign of inefficiency. Economic efficiency appears to mirror the micro-economic concept of perfect competition in its favourability, desirability, and its ability to elude. The idea of having an entire economy of products that appear to consumers homogenous and are offered at efficient and uniform prices (within each category) seems unlikely to ever be realized. However, studying the ideal makes it easier to understand the general trends of the economy.


Schiller, B. R. (2000). The Macro Economy Today. New York: McGraw-Hill.