Macroeconomics deals with aggregate economic factors and long-run issues in an economy. It helps predict economic events by providing an understanding of how the overall economy works. Macroeconomics is concerned with factors like inflation, unemployment, and growth at a national level. It analyzes aggregate supply and demand to determine equilibrium in goods and money markets. Key macroeconomic measurements include GDP, GNP, inflation, unemployment, and the business cycle.

1. Macroeconomics
 Relevant to the world politics, and deals with the job of making economics policies
 Helps to predict the future course of economic events while providing a great deal of knowledge
about how the economy works.
 Deals with both long run economic issues and the short run fluctuations that constitute the
business cycle.
Difference between Macro and Micro
Macroeconomics Microeconomics
Is concerned with aggregate factors Is concerned with specific economic units
More Practical More theoretical
Ex- inflation, unemployement Ex – individual demand, supply
Demand, Supply and Equilibrium
 Aggregate demand and supply means total demand for commodities and total supply of
commodities in an economy respective.
 Aggregate supply – relationship between the aggregate quantity of real GDP supplied and the
price level or amount of output the economy can produce given the resources and technology
available.
 Aggregate quantity of goods and services supplied is the sum of the quantities of all final goods
and services that all firms in the economy planned to produce.
 Position of supply curve depends on the productive capacity of the economy.
 Aggregate Demand– relationship between the aggregate quantity of real GDP demanded and
the price level.
 The aggregate demand curve shows the level of output at which the goods markets and money
market are simultaneously in equilibrium at each given price level.
 The position of the aggregate demand curve depends on monetary and fiscal policy and the
level of consumer confidence.
Full note set with Examples and Questions: http://www.executioncycle.lkblog.com/2012/06/my-
business-economics-and-financial.html

2. Equilibrium
𝐴𝑔𝑔𝑟𝑒𝑔𝑎𝑡𝑒 𝑠𝑢𝑝𝑝𝑙𝑦 = 𝐴𝑔𝑔𝑟𝑒𝑔𝑎𝑡𝑒 𝑑𝑒𝑚𝑎𝑛𝑑
𝑄𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑜𝑓 𝑟𝑒𝑎𝑙 𝐺𝐷𝑃 𝑑𝑒𝑚𝑎𝑛𝑑𝑒𝑑 = 𝑄𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑜𝑓 𝑟𝑒𝑎𝑙 𝐺𝐷𝑃 𝑠𝑢𝑝𝑝𝑙𝑖𝑒𝑑
Macroeconomic issues
Inflation - how quickly prices are raising. High inflation caused to less demand
Unemployment – the fraction of the labour force that is out of work
𝑁𝑜 𝑜𝑓 𝑢𝑛𝑒𝑚𝑝𝑙𝑜𝑦𝑒𝑑
𝑈𝑛𝑒𝑚𝑝𝑙𝑜𝑦𝑚𝑒𝑛𝑡 𝑅𝑎𝑡𝑒 = ∗ 100
𝐿𝑎𝑏𝑜𝑟 𝐹𝑜𝑟𝑐𝑒
Growth – rate at which the gross domestic product is increasing. Two causes affect to grow GDP
overtime
 Changes in available amount of resources in the economy
 Changes in the efficiency of factors of production
Business cycle
Full note set with Examples and Questions: http://www.executioncycle.lkblog.com/2012/06/my-
business-economics-and-financial.html

3. Macroeconomics measurements
Full note set with Examples and Questions: http://www.executioncycle.lkblog.com/2012/06/my-
business-economics-and-financial.html

4. Macroeconomics measurements – GNP
Income Method
Rentals,Dividends,Depreciation,intrests,etc.
Expenditure Method
𝑌 = 𝐶 + 𝐼 + 𝐺 + 𝑁𝑋
𝑌 = 𝑟𝑒𝑎𝑙 𝐺𝑁𝑃 𝑑𝑒𝑚𝑎𝑛𝑑𝑒𝑑
𝐶 = 𝑐𝑜𝑛𝑠𝑢𝑚𝑝𝑡𝑖𝑜𝑛
𝐼 = 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡𝑠
𝐺 = 𝑔𝑜𝑣𝑒𝑟𝑛𝑚𝑒𝑛𝑡 𝑒𝑥𝑝𝑒𝑛𝑑𝑖𝑡𝑢𝑟𝑒
𝑁𝑋 = 𝑁𝑒𝑡 𝐸𝑥𝑝𝑜𝑟𝑡 ( 𝐸𝑥𝑝𝑜𝑟𝑡 – 𝐼𝑚𝑝𝑜𝑟𝑡𝑠)
Full note set with Examples and Questions: http://www.executioncycle.lkblog.com/2012/06/my-
business-economics-and-financial.html

5. GDP And GNP
Gross Domestic Product – value of all final goods and services produced in the country within a given
time period.
𝐺𝑁𝑃 = 𝐺𝐷𝑃 + 𝑁𝑒𝑡 𝑓𝑎𝑐𝑡𝑜𝑟 𝑖𝑛𝑐𝑜𝑚𝑒 𝑓𝑟𝑜𝑚 𝑎𝑏𝑟𝑜𝑎𝑑
𝑁𝑒𝑡 𝐷𝑜𝑚𝑒𝑠𝑡𝑖𝑐 𝑃𝑟𝑜𝑑𝑢𝑐𝑡 = 𝐺𝐷𝑃 – 𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛
𝐺𝑁𝑃 𝐷𝑒𝑓𝑙𝑎𝑡𝑜𝑟 = (𝑁𝑜𝑚𝑖𝑛𝑎𝑙 𝐺𝑁𝑃)/(𝑅𝑒𝑎𝑙 𝐺𝑁𝑃)
GNP Deflator – reflects what is happening to the overall level of prices in the economy
Full note set with Examples and Questions: http://www.executioncycle.lkblog.com/2012/06/my-
business-economics-and-financial.html