Introduction to Macroeconomics

Shreeya gupta

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INTRODUCTION

Economics: The study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided.

Microeconomics: Concerned with the behavior of individual entities such as markets, firms and households.

Macroeconomics: Concerned with the overall performance of the economy.

Cont…

Macroeconomics (from the Greek prefix makro- meaning "large" and economics).

It is branch of economics dealing with performance, structure, behavior & decision-making of an economy.

This includes national, regional, and global economies

Characteristics

Macro economists study aggregated indicators such as GDP, unemployment rates, and price indices.

Macroeconomists develop models that explain relationship between such factors as:-

NI, output, consumption, unemployment, inflation, savings, investment, international trade & finance.

Cont…

Macroeconomics is a broad field of study, there are two areas of research:-

short-run fluctuation in national income.

long-run fluctuation in economic growth. 

Cont…

ME encompasses a variety of concepts & variables, but there are 3 central topics for ME research:-

Macroeconomic theories usually relate the phenomena of output, unemployment, and inflation.

These topics are also important to all economic agents

including workers, consumers, and producers.

Cont…

ME examines economies at the aggregate (international, national, regional) level.

Some aspects of ME are about comparing two aggregate economies at same time.

DEFINITION

Macro economics is concerned with the economy as whole large segments of it in macro economic attention is focused on such problems as the level of unemployment, the rate of inflation, the rate of inflation, the national total output & other matters of economy wide significance.

Scopes of macro economics Theory of income (expenditure, value added services)

Theory of output.

Theory of employment.

Theory of international trade (import, export)

Theory of money (CRR, SLR, REPO Rate)

Cont..

Theory of economic growth (Real income, GDP, GNP, per capita income).

Theory of distribution (wages, profits in total national income).

Theory of general prices level (e.g. Inflation, deflation etc).

LIMITATION

(1) The macro economies ignores the welfare of the individual.

For instance, if national saving is increased at the cost of individual welfare, it is not considered a wise policy.

Cont…

(2) Macro economics analysis regard aggregates as homogeneous but does not into its internal composition.

For instance, if the wages of the clerks fall and the wages of the teachers rise, the average wage may remain the same.

Cont…

(3)It is not necessary that all aggregate variable are important.

For instance, national income is the total of individual incomes. If national income in the country goes up, it is not necessary that the income of all the individuals in the country will also rise. There is a possibility that the rise in national income may be due to the increase in the incomes of a few rich families of the country.

UNEMPLOYMENT

INFLATION

Government taxes

Poverty problem

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