The economy is part of the social sciences and focuses on the analysis of the processes of production, exchange and consumption of goods and services. It’s about the discipline that studies the satisfaction of unlimited needs with scarce resources.
The macroeconomy, for its part, is the branch of economics that is responsible for studying the economic systems of a region or country as a set. For this, it uses collective magnitudes such as national income or the level of employment, among others.
Macroeconomics, therefore, studies the total amount of goods and services produced in a certain territory. It is usually used as a tool for political management, since it allows discovering how to allocate (scarce) resources to promote economic growth and improve the well-being of the population.
In general, macroeconomic studies are carried out at the level national (That is, they study the economic phenomena that occur within a country based on the relationships that internal actors maintain with each other and with the outside world).
Given the multiplicity and complexity of economic relationships, they are used macroeconomic models to facilitate studies, which are based on simplifying assumptions.
The opposite concept to macroeconomics is the microeconomics; in this case, the discipline is in charge of studying the economic behavior of individual agents (consumers, workers, companies, etc.).
In both macroeconomics and microeconomics, the factors studied must be considered from the relationships they establish: a consumer can also be a producer and investor, for instance.
The monetary value of the total assets and services that occur within a country over a year is known as income or national income. It is important to note that those products that have not been available on the market during the period to be analyzed should not be added, as this results in an error called «double counting«. In order not to fall into this problem, the subtraction of the magnitude of the inputs that a company buys and outputs that it produces (the terms of English origin refer to income Y expenses, respectively).
On the other hand, the value added, a concept that refers to the series of expenses that surround the purchase of materials and services from third parties, such as the payment of salaries to employees, the rental of offices or buildings, and the interests derivatives of the capital that is borrowed, among others. If all the added values generated by each production unit in a country over the course of a year are added, the income generated by it is obtained.
The definition of national income can be established from three very different points of view:
* such as the magnitude of the services and goods that have been produced, making sure not to incur the concept of double counting;
* as the total of the incomes that are received through the different factors of the production;
* as the sum of the expenses, which may have been allocated to the acquisition of consumer goods or investment.
This is so because the value of the total production is distributed (or distributed) among each and every one of the factors that are part of production. Given that the products that a company cannot sell, that is, that it accumulates in its deposits (known as involuntary stock), are considered as an investment (from an economic perspective), it is always possible to verify that the magnitude of saving equals that of investment.
Finally, it is worth mentioning that public spending what does the Condition to acquire goods and services (such as computer equipment, stationery, salaries of officials and weapons) are also part of the national income.