What Is the Connection between Macroeconomics and Economic Growth?

Macroeconomics is a broad economic field that deals with the behavior of an economy as a whole. This can involve the entire global economy or the economy of a given nation or region, insofar as it is possible to independently study such economic entities. Various trends and factors in macroeconomics, including interest rates, tariffs, and national economic policies, directly affect economic growth, so macroeconomics and economic growth are inseparably connected. The link between macroeconomics and economic growth can be seen both theoretically and practically. Academic studies of macroeconomics often focus on how various general economic processes and policies contribute to or harm economic growth while economic policy makers tend to enact practical policies that lead to growth.

Though the academic study of macroeconomics examines a vast range of topics, the relationship between macroeconomics and economic growth is often at the forefront of such academic pursuits. Determining which combinations of factors lead to long-term, sustained economic growth is, in fact, one of the main areas of study in academic macroeconomics. Researchers use a variety of mathematical principles, computer modeling systems, and other theoretical constructs and ideas to generate data about the relationship between macroeconomics and economic growth. Academic economists also tend to examine actual past and present macroeconomic policies and trends in order to determine their causes and consequences in the real world.

Economic policy-makers and advisers have a substantially different set of problems, as they are expected to use their knowledge of macroeconomics and economic growth to set practical economic policies in the real world. In many cases, such economists have similar training to academic economists and use many of the same tools. They must, however, work within the constraints of real-world issues, such as resource limitations, government regulations, and global political situations. Furthermore, there is substantial additional pressure because of the real-world consequences of making decisions that affect the movement of resources on a broad scale. A good economic policy can make many people happy, keep people employed, and generally elevate nearly everyone affected while a poor policy can lead to job loss, devastating resource shortages, and other negative effects.

Many different theories and models are used to describe the connection between macroeconomics and economic growth. Some argue that increasing the productive capacity of a nation is the best way to promote economic growth. Others place greater emphasis on advancements in technology. Still others are based in theories of government regulation and optimizing patterns of international trade. "Perfect" macroeconomic models and policies have not yet been devised, and real-world economic decisions often have deleterious effects on economic growth.