Macroeconomics is a concept and a subfield of economics that studies the performance, structure, and behavior of an economy as a whole, focusing on aggregate measures. It examines economy-wide trends, including national income, Gross Domestic Product (GDP), inflation, and unemployment. The modern discipline traces its origin to the publication of The General Theory of Employment, Interest, and Money in 1936 by British economist John Maynard Keynes. It emerged to solve the problem of prolonged, widespread unemployment and unsold goods during the Great Depression of the 1930s, which classical economic theories could not explain.
The core mechanism of macroeconomics, particularly the Keynesian school of thought, is the assertion that aggregate demand—the total spending by households, businesses, and the government—is the main driver of economic output and employment. When aggregate demand is insufficient, the economy can experience prolonged periods of stagnation. To manage and stabilize the economy, governments use two primary tools: fiscal policy, which involves government taxing and expenditure, and monetary policy, which is typically managed by a central bank.
An informed reader should connect macroeconomics to its key indicators and policy tools, such as the distinction between GDP and national income, and the use of fiscal policy and monetary policy. It is fundamentally different from Microeconomics, which studies individual economic units like firms and households. In India, a recent change in national income accounting occurred in January 2015, when the Central Statistics Office (CSO) replaced the measure of GDP at factor cost with Gross Value Added (GVA) at basic prices. The measure of GDP at market prices was also simplified to be referred to as just GDP.