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The Link Between Macroeconomics and Our Life
“Whatever affects one directly, affects all indirectly. This is the interrelated structure of reality.”
- Martin Luther King, Jr.
Life is about choices and the decisions we make. The choices that we have can lead us to success or
failure. Economics is the study of these choices. And there is an understanding in economics that
everything is interrelated, the choices we are making today will make up our future.
The patterns of transactions of every individual ultimately contributes to a greater whole. The field of
economics that concerns this greater whole is macroeconomics. Macroeconomics studies the
performance, structure, behavior and decision-making of an economy as a whole. Overall economic
activity is directly linked to the well-being of everyone in the economy, including yourself.
Hints of macroeconomics can be seen everywhere and is a part of how we live. It is in the prices that we
pay for goods and services, the interest rates in our loans, the probability of our employment, etc.
Macroeconomics is pertinent in our everyday lives.
Think about the time you borrow cash from someone, may it be your friend or classmate. Let’s say he
borrowed about 200 pesos. He approached you and offer to repay you today with 250 pesos or next month
with 300 pesos. Now naturally you will go with the latter because you will have more amount of cash.
However, looking into it, you must consider the time value of money. The economy is undergoing
inflation and prices of goods are rising. You may be better off having the money now for the reason that
you may not buy much product and service with the money that you will have next month. You must also
consider the potential gain of your money if you are going to invest it till next month, will it amount more
than the gain that you will receive from your friend if you delay receiving the payment. If we act on
instinct, we may choose the most pleasurable or easiest course of action, but the best decision in the short
term may not be best in long term.
Macroeconomics does not only affect you as an individual but your family as well. Let’s take into
consideration the income of your household. If your father earns 10,000 a month and the economy is
undergoing inflation, less goods and services will be purchased with that money because the things that
you will buy has become more expensive. And if the income of your father will not increase throughout
the years, it will affect your family’s future consumption. You may need to cut off on some goods and
enjoy less privileges.
The performance of the economy has a direct impact on your future employment as well. It will tell you if
you will be able to land a job after you graduate if you do look for a job, how much will you earn and
what can you purchase with the income that you will receive. Gross Domestic Product (GDP) is the
general measure of economic activity. When GDP growth is strong, firms hire more workers and can
afford to pay higher salaries and wages, which then again leads to more spending by your household on
goods and services.
Macroeconomics also involves the fluctuations on interest rate. If interest rate increases, it increases
the cost of mortgage payments and interest on loans but allows higher return on investment. Higher
interest rate can lead to a low performing economy and in which again increase your risk of
unemployment in the future. Higher interest rate on the other hand have inverse implication. Being
aware on this information, you can come up with better decisions like when it is more favorable for
your family to buy a new home or for you to invest in a savings account.
Macroeconomics also have a say in government spending, deciding interest rate and making policy
decisions. Government take in to consideration the macro economy when making decisions and these
decisions has a direct impact on level of economic activity and the inflation rate which in turn affect your
family and you as an individual. The chance of your employment in the future, the amount of interest
your household pay on loans, and tax rate is a manifestation of decisions made by the government
Macroeconomics affects your life in more ways than you can easily imagine. When making decisions
we tend to be impressionable and we don’t consider various economic factors. But having the
awareness on economic conditions and knowing economic potential can affect our decisions
adversely. Knowledge about economic activities gives you an upper hand and allows greater
tendency to create more desirable outcomes out of your decisions. It is essential to understand
macroeconomics because it widens our understanding which in turn improves the standards of living.