Macroeconomic variable – What is it, definition and concept | 2021

Although the above definition may seem a bit redundant, it does not have anything else. That is, a macroeconomic variable as its name indicates, it is a variable like any other and, therefore, it represents characteristics or qualities of a phenomenon. In this case, adding the adjective macroeconomic makes it clear that it is a variable that has to do with macroeconomics.

Macroeconomic variables are sometimes also known as aggregate variables. The meaning of this is that in the end, since macroeconomics studies the evolution of a set of individuals, a macroeconomic variable is the aggregation of many microeconomic variables.

For example, to calculate gross domestic product (GDP) which is a macroeconomic variable, we will need data for all individual producers. If we add the production, measured in monetary units, of all the individuals in a region or country, the result should be very close to GDP. That is, the set of microeconomic variables (production of each economic agent) make up a macroeconomic variable.

Another example of a macroeconomic variable could be inflation. If we take into account the rise in prices of each product, in each store, in each city, in the end something similar to inflation comes out. Something similar, we already say that inflation is an estimated data.

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What is a macroeconomic variable for?

A macroeconomic variable is used to analyze a part of the economic environment. Thus, if we want to know how the economic interaction of a country’s goods with the outside is evolving, we could analyze the trade balance.

The fundamental idea of ​​a macroeconomic variable is to reflect, usually numerically, part of the aggregate economic reality. Its study is essential to know in which part of the economic cycle we are or to understand which economic policies could be more effective.

For example, although some countries have done so, raising taxes in an economic crisis is generally not recommended. Why? Because economic agents are going through a bad time and need to have more disposable income to cope with the situation. Measuring economic activity using macroeconomic variables allows us to measure these types of details.

Main macroeconomic variables

The main macroeconomic variables are:

These three variables are undoubtedly the most important, followed and popular. They constitute the three macroeconomic variables of main interest. Now, obviously there are many more, such as:

The indicators named above refer to different sectors. For example, some describe a part of the financial sector, such as interest rates. While others describe a part of the fiscal sector (public debt) or the foreign sector (balance of payments).

Criticism of macroeconomic variables

In the 21st century, most economists deal with databases and indicators of all kinds. In the last century there was data but access to it was much more difficult.

With the evolution of technology and the internet, any economist can access any data. The fundamental problem with macroeconomic data is that many are estimates. That is, there are macroeconomic variables that are not directly observable or even if they were, they are not population data.

This is vitally important to understand that numbers are not perfect and that sometimes they can go wrong.

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