Chapter Summary

While macroeconomics is the study of the economic system looked on as a whole, twentieth century macroeconomics has been oriented toward a number of "problems" -- that is, economic trends and developments that have been seen as problems by at least some economists and other people. All are controversial among economists, to a greater or lesser degree, and part of the task will be to figure out whether they really are problems or not, and if so, whether there are solutions in the form of government economic policy.

Recession

Recessions are periods of decreasing production. The greatest recessions are sometimes called "depressions," and this includes, if none other, the Great Depression of the 1930's. Since the 1930's, recessions have been the central topic of macroeconomics.

Unemployment

For a person to be unemployed is for that person to be willing to work at a market wage but unable to get a job. It seems that relatively large numbers of people have become unemployed in most recessions, but there are some difficulties of measuring and interpreting unemployment.

Inflation

Inflation is defined as an increase in the general price level. The statistics on prices make it clear that the United States has experienced a good deal of inflation during the twentieth century, but there is some controversy about just how serious a problem moderate inflation is. Hyperinflation -- increases of the price level by large multiples -- is a crippling economic problem, but fortunately has not been very common, especially in the industrialized countries.

Stagnation

Stagnation is economic growth that, while positive, is less than the potential growth of the economy. Some economists believe that stagnation is a serious problem and a cause of other problems, but since identification of stagnation depends on one's idea of the potential, it remains controversial whether the slowing we see is stagnation or a reduction of the potential.

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