Macroeconomic policy aims to maintain the economy near full employment without aggravating inflationary pressures. The proper trade-off between these two goals is a source of ongoing debate.

The traditional tools of macropolicy are government spending and tax collection, which constitute fiscal policy, and manipulation of the money supply via monetary policy. Expansionary fiscal policy can stimulate the economy and increase GDP but tends to increase interest rates. Expansionary monetary policy works by lowering interest rates.

The business cycle is the economy's recurring pattern of expansions and recessions. Leading economic indicators can be used to anticipate the evolution of the business cycle because their values tend to change before those of other key economic variables.

Industries differ in their sensitivity to the business cycle. More sensitive industries tend to be those producing high-priced durable goods for which the consumer has considerable discretion as to the timing of purchase. Examples are jewelry, automobiles, or consumer durables. Other sensitive industries are those that produce capital equipment for other firms. Operating leverage and financial leverage increase sensitivity to the business cycle.