What is Macroeconomics? How Does It Affect You?6 min read

What is macroeconomics

Macroeconomics is the branch of economics study that takes into account changes that take place at the country level and have a huge impact collectively on the whole population. 

This might seem to be vague to a non-aware individual, macroeconomics would seem to be irrelevant to making own decisions.

However, once you understand how big economic decisions can make or break your budgeting strategies, you would prefer to keep a track of indicators. 

Suppose you earn ₹ 20,000 a month and your expenses are ₹ 5,000, since macroeconomics had a level impact on prices due to some policy changes, now your expenses are ₹ 8,000 for the same items but your income still stands at ₹ 20,000.

This will impact the whole of your consumption and savings decision and might also force you to delete some items from your demand basket. 

Macroeconomics has ton loads of branches but we would be discussing a few of them, the most important branches that would keep a check on your finances. 

Of course, some terms might seem to be vague for now, but once you get how they can pocket hole your bank account, you will be amazed to analyse the role of macroeconomics in real life. 


Inflation is an integral part of every economy in the world. Inflation in laymen’s terms means price level changes in goods and services in the economy. 

When prices of necessary items rise due to any reason, the economy as whole experiences inflationary pressures. 

Suppose crude oil price rises in the international market causing a high cost of production in our country. 

This will lead to manufacturers increasing the prices of the goods to incur the increased cost. This will reflect in the retail market as inflation. 

Now before you were getting the item for ₹ 500 now you might get the same quantity for ₹ 700. This will make you rethink your chives of consumption and might also lead to the discarding of unnecessary goods from your consumption basket. 

Think, if every consumer starts discarding demand, how will the economy work? 

This example tells you how you would beat loss due to macroeconomics changes on which you have no hold on. 

Reasons for inflation can be uncountable, but one internal decision of an economy has the most adverse effect on the price level. 

When the central monetary authority increases the money supply in the economy, the first change that happens is interest rates start to fall. 

This means you would prefer keeping cash in hand than having a negligible amount from banks. This increases spending as people have more money, which means demand in the economy increases widely. 

However, supply reacts slow to this demand and a huge inflationary situation occurs. 

One more consequence of this can be in financial markets. 

If interest rates in your economy rise, foreign investments will outflow rapidly and the financial markets will reflect huge position changes. 

Therefore inflation can blow out your purchasing power, investing power, and budgeting power. 


In India, the problem of unemployment is severe. How does this affects you even if you are employed? 

Yes, it does affect you, let’s see how!

If there is unemployment in the economy that means more people want to work but job opportunities are lesser. 

This means the labour market has an excess labour supply. As we know the rule of thumb, excess supply is complimented with down wages. 

Since wages fall, even if you are employed, you at some income statement and your income negotiating power decreases and the risk of job loss increase anytime.

 Since wages decrease, increments and salary hikes might not be sufficient to beat inflation. Therefore cause a hole in your pocket.

Unemployment creates a burden on the economy to feed more families out of government finances. This leads to less independence.

The financial markets also suffer when savings are less due to low income.

Since low income and consumption cannot be cut through, you would be left with a very less proportion of income to invest and gain interest on. 

Government budget 

The government budget is the policy of the government over macroeconomic issues like inflation, unemployment, and social welfare. 

The government budget is responsible to make up policies over issues and therefore creates room for correction.

However, government budget policies can be disastrous as well if not taken over by cautions.

Now if suppose you have a grandfather aged 75 years, and his monthly medical treatment expenses are about ₹ 10,000 and your salary income for each month is ₹ 30,000. Suppose the government looks at old age people’s medical expenses and sponsors medical treatment for people aged above 70 years. 

This macroeconomic decision would save you ₹ 10,000 monthly and will loosen the pressure on your wealth. You will have more chances of savings and investments.

However, consequences are not far away, the treatment that government sponsors erode government finances over social welfare and less fund are available for infrastructural needs. 

This might lead to cutting down expenses on public roads, educational centres etc. now you being a taxpayer can be exhausted due to low infrastructure availability even after paying the government for tax. 

This is how government budgets help you budget your finances and choices. 

Foreign and internal affairs  

Foreign and internal stability is very important to stabilise your budget. If there is some war going on outside your economy’s control, it will impact exchange rates, and import and export bills at the macro level. 

This will lead to price level changes in our economy due to the depreciation of the home currency.

Since import bills exceed the balance in our country’s bracket, the debt burden increases on the government that is shifted to the population via increased taxes. 

Since exports are impacted, the output falls on an aggregate basis leading to unemployment. The falls in exports and rise in import bills lead to a deficit in foreign accounts and therefore burdening foreign reserves of the country.

When the burden on reserves increases, domestic currency depreciation is further and might be a reason for inflation. All of them combined will lead to heavy pressure on your income and expenses.  

Internal stability can be in terms of investment decisions of government, these decisions will involve employment targeting and hence supporting the labour market. 

Internal affairs mean stability in the political system and social environment of the country. 

If the social environment is largely influenced by political instability in the country, the growth process slows down and hence impacting individual growth also in long run. 


The factors stated above are the most important ones to be considered before budgeting your income. Across the macroeconomics outlook, several other factors contribute to large unforeseen changes in the economic process and therefore slowly impact individual income in the country. Comparing and analysing income, savings, consumption and macroeconomics will lead to safe and secure budgeting under your sheets. 


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