Economic Class Note - The History of Macroeconomics

p {margin: 0; padding: 0;} .ft00{font-size:24px;font-family:Georgia;color:#000000;} .ft01{font-size:19px;font-family:Georgia;color:#000000;} .ft02{font-size:19px;line-height:25px;font-family:Georgia;color:#000000;} The History of Macroeconomics The History of Macroeconomics: The Development of Macroeconomic Thought and Policy Over Time Macroeconomics as a distinct field took shape in the early 20th century aseconomists sought to understand and address severe disruptions to the economy,notably the Great Depression. This note are traces the evolution ofmacroeconomic theory and policy from its beginnings through major shifts indominant schools of thought in response to economic events and crises over time. Classical economists provides the volatility of the early 20th century required awider view. Keynes’ (1936) The General Theory launched macroeconomics byarguing government intervention could stabilize the economy, in contrast toclassical notions of self-regulation. Keynesian theory dominated initially but came under critique in the 1970s amidhigh inflation and unemployment dubbed “stagflation” (Barsky & Kilian, 2002).Monetarists like Friedman argued that managing the money supply, not fiscalpolicy, was more effective for boosting output and employment long-term. By the 1980s, the new neoclassical synthesis merged elements of Keynesianismand new classical thought. Central banks aimed to control inflation throughmoney supply adjustments while fiscal policy focused on long-run deficits(Goodfriend & King,1997). In response, a split has emerged between followers of new Keynesian models thatincorporate insights like market rigidities and imperfect information, andproponents of neoclassical approaches prioritizing market efficiency (Woodford,2009; Cochrane, 2011). Ongoing debates weigh fiscal intervention versusausterity and monetary tools like quantitative easing. In conclusion, macroeconomics has evolved significantly from its origins butremains divided on models and optimal policies. As new crises emerge, fromclimate change to demographic shifts, adaptations to macroeconomic thoughtand practical policymaking will continue.