ECONOMIC INFLUENCES ON THE FINANCIAL MARKET

Macroeconomics is the study of the entire economy in terms of the total number of goods and services produced, total income earned, the level of employment of productive resources, and the general behavior of prices. Macroeconomics can be used to analyze how best to influence policy goals such as economic growth, price stability, full employment and the attainment of a sustainable balance of payments.

Until the 1930s most economic analysis concentrated on individual firms and industries. With the Great Depression of the 1930s however, (see table below), and the development of the concept of national income and product statistics, the field of macroeconomics began to expand.

Particularly influential were the ideas of John Maynard Keynes, who used the concept of aggregate demand to explain fluctuations in output and unemployment. Keynesian economics is based on his ideas.

In this section we are going to look at some of the principles within macroeconomics that will give us more of an understanding in this important subject.

Some Information on the U.S Great Depression

Unemployment rose from 3.2% to 25.2%. Real GDP fell by 30%

Gross investment dropped by 85%

Nominal interest rates on prime commercial paper dumped from 5.9% to 1.7%