Macroeconomics

Macroeconomics studies economic issues at the aggregate level. The first question one may ask is: how much does a nation produce, or what is its total output? Setting aside the detailed answers to that question, one might next ask how nations can interact economically with one another.

Within a Nation

To measure the total output, it gave rise of a concept, Gross Domestic Product (GDP), which measures the total value produced by an economy during a specific period.

Value is subjective by nature, but it becomes objective when expressed at the margin, as the market price. Because nominal prices are denominated in money, GDP is potentially distorted by changes in the value of money.

Understanding money is therefore one of macroeconomics’ core tasks, and related phenomena such as inflation matter just as much. Measurement is only the starting point. The next questions are how an economy grows, which factors drive that growth and why economic growth appears cyclic.

Between Nations

Shifting the focus from within nations to between them, the law of comparative advantage holds that open economies are preferable. Macroeconomics therefore studies subjects such as exchange rates, trade balances, and tariffs. Exchange rates, in particular, are a source of much confusion.

Confusions in the Mainstream Macroeconomics

Current mainstream macroeconomics deviates from its microeconomic foundations. Many of its theories are either logically inconsistent or have less explanatory power than the framework developed by Professor Xie.