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Macroeconomics
Macroeconomics is the study of the national economy viewed as a single interactive system. It is concerned, not with individual transactions, but with economy-wide aggregates, including national income, the rate of inflation and the unemployment rate. At the theoretical level it seeks to explain how national income grows, how it fluctuates and what then happens to prices and unemployment. At the positive level it tests competing theories against the evidence provided by economic statistics, and it estimates the numerical relationships required to construct forecasting models. At the application level it considers what policies would serve to promote economic stability and growth and full employment.
Since a national economy is too complex to analyse for those purposes, macroeconomics uses simplified versions which ignore those components that are thought to have relatively little influence upon the question under consideration. The initial procedure postulates the way that the components of the system interact and deduces from those postulated relationships, how the system as a whole may be expected to behave. That deductive process is normally followed by the use of evidence and inductive reasoning to test, either the relationships themselves, or the deduced behaviour of the system.
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