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Until the 1930s most economic analysis concentrated on individual firms and industries. With the Great Depression of the 1930s, however, and the development of the concept of national income and product statistics, the field of macroeconomics began to expand. Particularly influential were the ideas of John Maynard Keynes, who used the concept of aggregate demand to explain fluctuations in output and unemployment. Keynesian economics is based on his ideas.

One of the challenges of economics has been a struggle to reconcile macroeconomic and microeconomic models. Starting in the 1950s, macroeconomists developed micro-based models of macroeconomic behavior (such as the consumption function). Dutch economist Jan Tinbergen developed the first comprehensive national macroeconomic model, which he first built for the NetherlandsDutch redirects here. For other uses, see Dutch (disambiguation). The Netherlands ( Dutch: Nederland is the European part of the Kingdom of the Netherlands, a constitutional monarchy. It is located in northwestern Europe and borders the North Sea, Belgium and later applied to the United StatesThe United States of America also referred to as the United States U. America ¹ or the States is a federal republic in central North America, stretching from the Atlantic in the east to the Pacific Ocean in the west. It shares land borders with Canada in and the United KingdomThe United Kingdom of Great Britain and Northern Ireland is a state in Western Europe, usually known simply as the United Kingdom the UK Britain or less accurately as Great Britain . The UK was formed by a series of Acts of Union which united the formerly after World War IIWorld War II was the most extensive and costly armed conflict in the history of the world, involving the great majority of the world's nations, being fought simultaneously in several major theatres, and costing tens of millions of lives. The war was fough. The first global macroecomomic model, Wharton Econometric Forecasting AssociatesWharton Economic Forecasting Associates (WEFA was a world-leading Economics forecasting and consulting organisation founded by Nobel Prize winner Lawrence Klein. WEFA's LINK project, to produce the world's first global macroeconomic model, was mentioned i LINKLINK is a project started in 1968 by Wharton Econometric Forecasting Associates or WEFA, (now Global Insight), to build the world's first global macroeconomic model, linking models of many of the world's countries so that the effect of changes in the econ project, was initiated by Lawrence KleinLawrence Robert Klein (born September 14, 1920) is an American economist. Klein was born in Omaha, Nebraska of Jewish descent. For his work in creating computer models to forecast economic trends in the field of econometrics at the University of Pennsylva and was mentioned in his citation for the Bank of Sweden Prize in Economic Sciences in Memory of Alfred NobelThe Bank of Sweden Prize in Economic Sciences ( Swe. Sveriges Riksbanks pris i ekonomisk vetenskap till Alfred Nobels minne , often inaccurately called The Nobel Prize in Economics or The Nobel Prize for Economics is different from the rest of prizes awar in 1980.

Theorists such as Robert Lucas Jr suggested (in the 1970s) that at least some traditional Keynesian macroeconomic models were questionable as they were not derived from assumptions about individual behavior. However, New Keynesian macroeconomics has generally presented microeconomic models to shore up their macroeconomic theorizing, while the Lucas critique has fallen from favor.

In 2004, the Norwegian Finn E. Kydland and the American Edward C. Prescott, won the Nobel Prize in economy for their work in this area.

Today the main schools of macroeconomic thought are as follows:

• Keynesian economics, which focuses on aggregate demand to explain levels of unemployment and the business cycle. That is, business cycle fluctuations should be reduced through fiscal policy (the government spends more or less depending on the situation) and monetary policy. Early Keynesian macroeconomics was "activist," calling for regular use of policy to stabilize the capitalist economy, while some Keynesians called for the use of incomes policies.

• Monetarism, led by Milton Friedman, which holds that inflation is always and everywhere a monetary phenomenon. It rejects fiscal policy because it leads to " crowding out" of the private sector. Further, it does not wish to combat inflation or deflation by means of active demand management as in Keynesian economics, but by means of monetary policy rules, such as keeping the rate of growth of the money supply constant over time.

• Post-Keynesian economics represents a dissent from mainstream Keynesian economics, emphasizing the role of uncertainty and the historical process in macroeconomics.

• New classical economics, which emphasises the idea of rational expectations. Their original theoretical impetus was the charge that Keynesian economics lacks microeconomic foundations -- i.e. its assertions are not founded in basic economic theory. This school emerged during the 1970s. This school assumed that at any one time, there was only one " market clearing" equilibrium and that the economy automatically gravitated to that equilibrium. Fluctuations occurred due to changes in potential output, i.e., changes in aggregate supply.

• New Keynesian economics, which developed partly in response to new classical economics. It strives to provide microeconomic foundations to Keynesian economics by showing how imperfect markets can justify demand management.

• Supply-side economics, which deliniates quite clearly the roles of monetary policy and fiscal policy. The focus for monetary policy should be purely on the price of money as determined by the supply of money and the demand for money. It advocates a monetary policy that directly targets the value of money and does not target interest rates at all. Typically the value of money is measured by reference to gold or some other reference. The focus of fiscal policy is to raise revenue for worthy government investments with a clear recognition of the impact that taxation has on domestic trade.

• Austrian macroeconomics presents another laissez-faire school of macroeconomics. It focuses on the business cycle that arises from government or central-bank interference that leads to deviations from the natural rate of interest.