While macroeconomics might seem like an abstract field of study to some, for others it represents a very real link to personal life. Certain macroeconomic concepts do not just play out in textbooks. Rather, they have real-life applications to individuals in a wide range of situations. Specifically, unemployment, inflation, and the consumer price index can all be linked to the real world, and while they might not have an especially evident everyday effect on one’s own daily life, it is possible to see where they might apply.
Unemployment can be related to personal life in a number of different ways. When one looks at the overall unemployment rate, one sees a very real reflection of how difficult it is for the average person to get a job. When unemployment rates climb near ten-percent, this means that business in general are not hiring as often, and this can make it very difficult to get a job. It is important to look past the national unemployment rate if one wants to know how this relates to real life, though. Regional unemployment rates are much more telling. Regionally, rates can climb as high as 20-percent or 30-percent. This reflects the reality that in some parts of the country, it is very difficult to find work. Likewise, one could look to the “real” unemployment rate, which includes those people who are under-employed. Often, a person might be excluded from the unemployment rate because they have some work or because they have stopped looking for work. When the true unemployment rate includes those people, it is a reflection not only of how difficult it might be for me to get a job, but also how difficult it would be for me to get a good job.
When expected inflation hits the country, a number of things happen that alter the reality of individual life. For instance, an expected inflation situation will bring about higher prices in many stores, as those stores might raise prices in order to prepare for the inflationary changes. When businesses and the government see inflation coming, there will also be a rise in interest rates. This will mean that it is harder to get a loan, and when one gets a loan, that rate will sometimes be prohibitively high. These things require a personal adjustment in lifestyle. Unexpected inflation can be even more difficult to deal with. Unexpected inflation can be a boon for businesses. They get a good excuse for raising prices, but they do not have to have a corresponding raise in employee wages. Likewise, one of the upsides to unexpected inflation is that people who have borrowed money end up with more value. They get to pay back their loans with money that has suddenly lost value. In essence, a person who borrowed one hundred dollars before an extended period of unexpected inflation now gets to pay back that loan with ninety-five dollars worth of money at the time the loan is repaid.
The Consumer Price Index (CPI) is one measure of inflation. It is reflective of the price that different households have to pay for those things that they might buy during the course of the year. When the CPI goes up, it means that people are having to pay more money just to live. This can raise the costs of things that I might buy during any given year, including clothing and the like. When it goes down, that means that deflation might be happening, and it reflects both lower prices for me and potential problems for the economy at large in some cases.