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What if there were never problems of unemployment, inflation, or poor economic growth?...

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z277 | eNotes Newbie

Posted September 19, 2013 at 5:44 PM via web

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What if there were never problems of unemployment, inflation, or poor economic growth?  What would be the role of macroeconomics theory in such an economy?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted September 19, 2013 at 6:26 PM (Answer #1)

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If there were an economy in which there was never excessive unemployment or inflation and in which economic growth was always strong, that economy would probably not need macroeconomic theory.  This is because the main point of macroeconomic theory is to prevent those sorts of problems from occurring.

Macroeconomic theory is generally meant to provide ways to make sure that the economy grows at a decent pace and does not experience excessive unemployment or inflation.  If this is already happening without any government intervention, there will be no need for macroeconomic theory.

The only exception to this rule is if we say that the good times do not necessarily last.  If the economy might someday start to fail, we would need to develop macroeconomic theories in the present.  In other words, we would need to determine why the economy works so well now, so that we could fix it if things started to go wrong.

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