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Macro economics
Macro economics
Macro economics
Macro economics
Macro economics
Macro economics
Macro economics
Macro economics
Macro economics
Macro economics
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Macro economics

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  • 1. MACRO ECONOMICS
  • 2. MICRO ECONOMICS MACRO ECONOMICS Study of individuals and business decisions Looks at higher up country and government decisions. Decisions regarding the allocation of resources and prices of goods and services. Studies the behavior of the economy as a whole and not just on specific companies, but entire industries and economies. Focuses on supply and demand and other forces that determine the price levels seen in the economy Looks at economy-wide phenomena, such as Gross National Product (GDP) and how it is affected by changes in unemployment, national income, rate of growth, and price levels Microeconomics takes a bottoms-up approach to analyzing the economy Macroeconomics takes a top-down approach
  • 3. IMPORTANCE OF MACRO ECONOMICS • Understanding working of economy:-Macroeconomics gives bird’s eye view of the economic world. It helps in understanding how the macroeconomic variables behave in the aggregate by the study of the national income, aggregate output, gross saving and output, national expenditure • Formulation of economic policies:-Provides a sound basis for the formulation of government’s economic policy for the removal of poverty, employment and price stabilization based upon reliable statistics of the aggregate variables. • Controlling economic fluctuations:- Economic fluctuations like trade cycle, inflation, deflation etc. need to be handled appropriately in appropriate period to correct them. This will give a finite direction to the economy. For this the knowledge of macroeconomics is essential.
  • 4. • Helpful in international comparisons:-Only macroeconomic variables like national income, total output, aggregate demand, and consumption behavior and investment patterns of different countries can be easily compared. • National Income:-National income is the barometer that scales the growth of a country. It analyses the overall performances of the economy within a given period of time and allow us to compare that performance with the post. • Studies other economic problems:-Studies the problems of unemployment, inflation, economic instability and economic growth and enriches our knowledge of functioning of the whole economy by studying level of national income, output, investment, saving, and consumption.
  • 5. LIMITATIONS OF MACRO ECONOMICS • The macro economies ignore the welfare of the individual: If national saving is increased at the cost of individual welfare, it is not considered a wise policy. • The macro economics analysis regards aggregates as homogeneous but does not look into its internal composition: If the wages of the clerks fall and the wages of the teachers rise, the average wage may remain the same. • Difficulty in the measurement of aggregates: It is difficult to measure the big aggregates.
  • 6. • Indicates no change has occurred: The study of aggregates make us believe that no change has occurred even if there is a change. It indicates that there is no need of new policy. For example, a 5% fall in agricultural price an 5% rise in industrial prices does not affect the price level • It is not necessary that all aggregate variables are important: 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.
  • 7. Macro Economic Variables/Indicators • Consumption • Saving • Investment • National Income • Export and Import • Government Expenditures • Taxes • Transfer Payment • Rate of Interest • Demand for Labor • Supply of Labor etc.
  • 8.  Stock Variable verses Flow Variable  Stock Variables  Those variables whose values are measured from particular point of time such as weight of a car, water in a tank etc..  Similarly, In macro economics we have lots of stock variables such like supply of money, the deposits in the bank, the amount of wealth possess by a person etc.
  • 9.  Flow Variables  Are those variables whose values are measured from particular period of time such as speed of a car during ten (10) minutes.  In macro economics national income, consumption, saving, investment and rate of interest are all flow variables.
  • 10.  Endogenous and Exogenous Variables  Endogenous Variable: The variables whose values are determined within the model are known as endogenous variables. For example In two sector economy Y=C+ I Y is endogenous variable, The purpose of this model is to find the value of Y.

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