1. Macroeconomic Perspective:
Individual households > Aggregate (Total) households
Individual firms > Firms in Aggregate (Total)
From household/consumer income > National Income
From a focus on the price of individual products > to Overall Price Level
From the demand for labor by indiv. Firms > to Total Employment

2. Major focus of Macroeconomics:
What determines national income?
What determines aggregate (total) demand and investment?
What determines the overall price level?

3. Emergence of a macroeconomic perspective on economy-wide problems: The Great Depression
Dominance of Neoclassical economic theory until early 1930’s
Underlying theoretical assumption: The market economy is self-correction – recessions will cure themselves.
Why? Recessions were caused by external factors – not by weaknesses in the economic system itself
--- natural disasters, weather, etc.
If too unemployment was high, there must be an excess supply of labor
So the price of labor (wages) would fall and a new lower equilibrium wage would restore full employment.
Believed policy intervention to restore equilibrium was therefore unnecessary.

4. Unemployment continued to rise and quickly reached double digits; It peaked at 25% by 1934.
Neoclassical economic theory could not explain this.
There were no solutions outside of the narrow theory maintaining self-correcting markets.
New perspectives: Examined the dynamics of the economy overall and what drives aggregated demand and supply
Looked at the position of participants in the economy – how could they stimulate aggregate demand, reduce unemployment and return the economy to full employment output.
Consumers
Businesses
Rest of the World (exports)
Government