What is a 'Macroeconomic Factor'
A macroeconomic factor is a factor that is pertinent to a broad economy at the regional or national level and affects a large population rather than a few select individuals. Macroeconomic factors such as economic output, unemployment, inflation, savings and investment are key indicators of economic performance and are closely monitored by governments, businesses and consumers.
BREAKING DOWN 'Macroeconomic Factor'The interplay or relationship between various macroeconomic factors is the subject of a great deal of study in the field of macroeconomics. While macroeconomics deals with the economy as a whole, microeconomics is concerned with the study of individual agents, such as consumers and businesses and their economic decision-making.
A macroeconomic factor can include anything that influences the direction of a particular large-scale market. Items such as fiscal policy and various regulations can impact the economy of a state or nation, and can even have international implications. Not all macroeconomic factors are negative, such as those that promote economic growth.
Negative Macroeconomic Factors
Negative macroeconomic factors include events that may put a national or international economy in jeopardy. General feelings of political instability, including a nation’s involvement in either civil or international wars, will experience economic shifts. This can be due to the reallocation of resources common in war-time economies, as well as any damage to property, assets and livelihoods as a result of the turmoil.
Unanticipated events, such as the debt crisis that began in 2008 within the United States and had cascading implications across the globe, would qualify as a macroeconomic factor, along with significant national disasters, such as earthquakes, tornadoes and flooding.
Neutral Macroeconomic Factors
Certain economic shifts are neither positive nor negative by design. Instead, the exact implications are determined by the intent of the action. This can include issues that aim to regulate trade across state or national borders. The nature of the change, such as enacting or rescinding a trade embargo, will have a variety of affects depending on which economy is being examined.
Positive Macroeconomic Factors
Positive macroeconomic factors generally include events that lead to prosperity within a nation or multiple nations. For example, a decrease in fuel prices within the United States may drive consumers to purchase more retail goods and services. As the demand for goods and services increases, suppliers of those items, both nationally and internationally, will see increased revenue from the heightened consumer activity. In turn, these increased profits may see stock prices rise.
Macroeconomic Factor Cycle
Often, economies are cyclic at the macroeconomic level. As positive influences lead to prosperity, this may raise certain prices due to increased demand. This may then suppress the economy as households become more restrictive of their spending. As supply begins to outweigh demand, prices may again dip, leading to additional prosperity until the next shift in economic supply and demand.