What is macroeconomics? – InvestBro

In everyday life, you must be familiar with words such as inflation, unemployment interest rate or poverty These words are often mentioned in the news about the Indonesian economy.

The above terminology is one of many topics covered in one branch of economics, macroeconomics. What is macroeconomics? And what is the impact on the Indonesian economy as a whole? Check out the following discussion.

Definition of Macroeconomics

Macroeconomics or Macroeconomics It is a branch of economics that studies the state of the economy as a whole. Be it an individual, a household, a company or a government.

For example, by lowering the standard interest rate. The government hopes that people will have the courage to borrow money from banks. so that the economy can recover again Another example is the government applying a discount policy for certain taxes. This makes it easier for companies and MSMEs to start new businesses.

The term macroeconomics became popular in the 1940s after the United States experienced the Great Depression and the economic theory of John Maynard Keynes became popular. Before that era, the international community could not differentiate between microeconomics and macroeconomics.

One thing I learned from the Great Depression was the importance of the government’s role in actively participating in the economy. before the crisis people in the united states They tend to embrace an economy as liberal as possible with minimal role from government. However, after a crisis, Clearly, governments need to actively participate in overcoming economic problems. This is where the term macroeconomics came from and became popular.

Here are some of the topics and indicators that have been widely studied in the study of macroeconomics:

• Gross Domestic Product (GDP).
• inflation.
• Referral rate.
• international trade (international finance).
• investment
• Poverty.
• unemployment
• price index.
• consumption.
• inequality
• and many others.

Objectives of macroeconomic policy

1. Maintaining the country’s economic stability

economy as in general business can move up and down Sometimes in the boom (smooth and very profitable) but sometimes losing money or economic recessions as well. One of the tasks of macro-policy makers is to maintain the country’s stability during that period.

Because even though it’s good economic prosperity Excessively prolonged prices can cause the price to skyrocket and lead to the next recession. There are many phenomena of a recession or even a preceding financial depression. boom economy many years

2. Increased economic growth

One of the factors often used as a comparative indicator between one country and another is economic growth, or economic growth. economic growth It is the ratio of the comparison between the value of a country’s GDP in a given year. with the previous year

the higher economic growth The country is generally considered a good thing. However, too intense economic growth is not good. Therefore, this variable must also have a target and must think of a target that is suitable for the economic situation in that year.

3. Increasing economic development

economic development (economic development) is a part of macroeconomics that not only sets goals for economic growth and productivity. but also the welfare of society as a whole. Issues discussed in this field such as poverty, unemployment, income inequality. and including health

The better the economic development of the country. People will not only be more productive. But still able to escape from poverty. Be physically and mentally healthy and prosperous as well.

4. Manage balance of payments

balance of payments (balance of payments) is a record of money transactions in and out of the country within a certain period of time. This money in and out can take the form of exports and imports. (Balance/current account) current account), including in the form of investment (capital account).

The money that comes in comes from exports as well. capital inflowCan increase the country’s foreign exchange On the other hand, the money coming out is due to imports as well. capital outflow Reduce the country’s foreign exchange reserves.

There are three “states” of the balance of payments: surplus, deficit, and neutral. The surplus balance means that export earnings and capital inflows exceed imports and capital outflows. The opposite of a surplus is a deficit. while a neutral balance of payments means that the value of money in equals the value of money out.

A deficit isn’t necessarily a bad thing. as well as a surplus in the balance of payments. This is because there are times when both the public and private sectors require more money than foreign investors. must be handled in the wisest way possible.

5. Control the price of goods in the country.

One of the objectives of macroeconomic policy is to control the prices of goods within a country. As discussed in the article Inflation and Deflation. Excessive increases or decreases in the prices of goods are bad for the economy of a country. Therefore, product prices must be controlled not to go up or down too much.

to achieve this goal The government can raise interest rates. Implement fiscal policies such as setting maximum retail prices (HET), conducting unannounced audits (Sidak), and more.

Types of Macroeconomic Policies

Macroeconomic policies fall into at least three categories: fiscal policy; monetary policy and policy from the supply side

1. Fiscal Policy

fiscal policy It is a macroeconomic policy that deals with government revenue and spending. Therefore, this policy in Indonesia is supported by the Ministry of Finance.

An example of a macroeconomic policy in the form of a fiscal policy is a tax rebate. A tax rebate is a reduction in the amount of tax payable by taxpayers. The hope is that the money that was supposed to be taxed is being used for business again.

Another example is the policy of eliminating fuel subsidies. Fuel subsidies reduce the cost of fuel per liter. People will have to pay more for a liter of petrol and the government will have more money to allocate for other purposes.

Taxes and subsidies are two things directly related to government revenue and spending. The more taxes people have to pay. The higher the government’s revenue, on the other hand, the more subsidies the government provides. The more you spend, the more you spend.

2. Monetary policy

Monetary policy is an economic policy that deals with the amount of money circulating in society. Controlling this money supply will affect inflation and bank interest rates. in Indonesia This policy is managed by Indonesian Bankas a financial authority

An example of monetary policy is a change in the underlying interest rate before COVID-19. And after COVID-19, in the early days of Covid19, the benchmark interest rate at BI dropped from 4.25% to 3.75% to a low of 3.5%. so that the economic wheel can start again

In line with the economic recovery and international economic pressures, BI has gradually raised its benchmark interest rate as of November 17, 2022. The BI7DRR or BI reference rate was increased from 4.75% to 5.25% to cope with inflation. and a decrease in the exchange rate of the rupiah against the dollar.

3. Supply Policy

The Indonesian government also issued various policies. that are not directly related to government revenues and expenditures Including the amount of money in circulation Some sources say such policies fall into the category of supply-side policies.

As an example, the government uses the regional minimum wage (UMR) to link benefits to employers who want to reduce production costs and employees who want more income to meet day-to-day needs.

Another example is the bureaucratic overhaul involved in both domestic and foreign investment. The goal is to make it easier for local and foreign investors to invest in Indonesia.

Scope of Macroeconomics

macroeconomics (macroeconomics) has 3 scopes:

1. Government policy

as an economic player The government is the only entity that has the right to control and mediate the interests of other economic actors. Therefore, it is necessary to play a role of the government in stabilizing the country’s economy.

2. State and regional economy

Although it has a smaller scope. but macroeconomic policy (particularly fiscal policy) can be applied at the regional level as well. This is considering that each region in Indonesia has the power to manage its own territory. There are also some taxes and fees that go solely to the local government without going to the centre. Standard interest rates, state income, etc. are still controlled and managed by the federal government.

3. Overall economic situation

Macroeconomics does not focus on the interactions between economic actors. But how the interactions between these economic actors can affect a country’s economy as a whole.

For example, person-company interactions take on the form of dismissal (PHK) for these economic actors. It may only be the termination of the contract. but in macroeconomics This is called an increase in the number of unemployed people. If the layoffs are large and protracted. It can cause bigger economic problems.

Differences of Macroeconomics and Microeconomics

macroeconomics (macroeconomics) is different from microeconomics (microeconomics). Microeconomics focuses on how economic actors make decisions about finite resources and maximize profits.

The focus of macroeconomics is the overall state of a country’s economy. Therefore, many people say that the focus of microeconomics is somewhat smaller than that of macroeconomics. even in many cases Action in microeconomics may have the opposite meaning in macroeconomics.

For example, people save at banks for additional (micro) income due to high bank interest rates. However, for macroeconomics, this could be interpreted as one of the factors slowing the economy and overall national income.

The dynamic differences between macroeconomics and microeconomics make occasional discussions about economics still an interesting debate.