Eco 2nd year Law, 2nd semester for 1st year

ရန္ကုန္အေ၀းသင္တကၠသုလ္
Online LLB course
Eco
1st year (2nd semester)

1
Chapter 1
Introduction to Macroeconomics
Learning Objectives
 Definitions of Macroeconomics
 The difference between Macro and Microeconomics
 Macroeconomic objective
 Macroeconomic policy instruments
1.1 What is Macroeconomics?
Economics has two components: microeconomics and macroeconomics.
Microeconomics essentially examines how individual units, whether they be
consumers or firms, decide how to allocate resources and whether those decisions are
desirable.
Macroeconomics studies the economy as a whole; it looks at the aggregate
outcomes of all the decisions that consumers, firms, and the government make in an
economy.
Macroeconomics is about aggregate variables such as the overall levels of
output, consumption, employment, and prices—and how they move over time
and between countries.
Macroeconomics focuses on the policies that effect consumption and
investment, the foreign exchange and the trade balance, the determinants of changes.
In wages and prices, monetary and fiscal policies, the money supply, budget, interest
rates, and the national debt. In brief macroeconomics deals with the major economic
issues and problems of the day.
Macroeconomics is an important subject because a nation can affect its
economic performance. By a judicious choice of macroeconomic policies, a nation
can speed or slow its economic growth, ignite a rapid inflation or slow prices increase,
produces a trade deficit or a trade surplus.
Macroeconomics relies on the aggregation of microeconomic information. As
soon as units are aggregated into groups, firms into industries, households into

2
consumers, and so on, the movement in away from microeconomics to
macroeconomics. There is no sharp dividing line between the two nor should there be.
Thus, the movement from the price of oranges to circus fruit prices, to agricultural
prices, to food prices, to the consumer prices level represents a continuous although
divisible, spectral. The process of aggregation from micro to macro of other economic
variables is similar to that of price. Macroeconomics is not directly concerned with
the consumption behaviour of any one household or the investment behaviour of any
one firm but with total consumption and total investment.
Macroeconomics involvers ‗choice among alternative central objection. A
national cannot simultaneously have high consumption and rapid growth. To lower a
high inflation rate requires either a period of high unemployment and low output or
interfering with free market though wage-price policies. These choices are spurning
those that must be facet by macroeconomic policy makers in every nation.
Macroeconomics is concerned with the behaviour of the economy as a whole
with booms and recession, the economy‘s total output of goods and services and the
growth of output, the rates of inflation and unemployment, the balance of payments
and the exchange rates. Macroeconomics also deals with the shot- run fluctuations
and business cycle.
1.2 The Difference between Macro and Microeconomics
Macroeconomics is different from microeconomics, which deals with the
study of individual firms, people or markets.
In microeconomics the focus is on a small group of agents, say a group of
consumers or two firms battling over a particular market. In this case, economists pay
a great deal of attention to the behaviours of the agents the model is focusing on. They
make assumptions about what consumers want or how much they have to spend, or
about whether the two firms are competing over prices or market share, and whether
one firm is playing an aggressive strategy, and so on. The result is a detailed analysis
of the way particular firms or consumers should behave in a given situation.
However, this microeconomic analysis does not explain what is happening in the
wider economic environment. Think about consumers‘ choice of what goods to
consume. In addition to consumers‘ own income and the price of the goods they wish
to purchase, their decisions depend on an enormous amount of other information.

3
How high is unemployment? Is the government going to increase taxes? Is the
exchange rate about to collapse, requiring a sharp increase in interest rates? Or
consider our two firms competing over a market. If one firm is highly leveraged (i.e.,
has a lot of debt) it may not be able to adopt an aggressive price stance if it fears that
interest rates are about to rise sharply because then the losses from a price war might
bankrupt it. Similarly, if imported materials are important for the firm‘s production
process, then a depreciating currency will lead to higher import costs, reducing profit
margins even before the firm engages in a price war. While none of these background
influences—shifts in interest rates or movements in the exchange rate—are under the
control of the firm or consumer, they still influence their decisions.
The economy, as a whole, represents the outcome of decisions that millions of
individual firms and consumers make. While each particular firm does not
significantly affect inflation or the growth of output in the whole economy, the
economic performance of an economy does reflect the combination of all these
millions of decisions. The inflation rate reflects the number of firms that are
increasing prices and the amount by which each firm is raising prices. In other words,
all of the individual pricing decisions that millions of firms make determine the
macroeconomic environment. While microeconomics is mainly concerned with
studying in detail the decisions of a few agents, taking as given the basic economic
backdrop, macroeconomics is about studying how the decisions of all the agents who
make up the economy create this backdrop. Consider, for instance, the issue of
whether a frim should adopt the latest developments in information technology (IT)
which promise to increase labour productivity by say 20%.
A microeconomic analysis of this topic would focus mainly on the costs the
firm faces in adopting this technology and the likely productivity and profit gains that
it would create. Macroeconomics would consider this IT innovation in the context of
the whole economy. In particular, it would examine how, if many firms were to adopt
this technology, costs in the whole economy would fall and the demand for skilled
labour would rise. Combined with the resulting increase in labour productivity, this
would lead to an increase in wages and the firm‘s payroll costs. It might also shift
demand away from unskilled towards skilled workers, causing the composition of
unemployment and relative wages to change.
This example reveals the differences between the two approaches. The
microeconomic analysis is one where the firm alone is contemplating adopting a new

4
technology, and the emphasis is on the firm‘s pricing and employment decisions,
probably holding wages fixed. In other words, the analysis assumes the firm‘s
decisions do not influence the background economic environment. In contrast, the
macroeconomic analysis examines the consequences when many firms implement the
new technology and investigates how this affects economy-wide output, wages, and
unemployment. Both forms of analysis have a role to play and which is more
appropriate depends on the issues to be analysed and the question that needs to be
answered.
In short, Macroeconomics is about the economy as a whole. It studies
aggregate phenomena, such as living standards (long-term growth), business cycles
(short-term fluctuations), inflation, unemployment, and international economic
relations (balance of payments).
1.3 Macroeconomic objective
Broadly, the objective of macroeconomic policies is to maximize the level of
national income, providing economic growth to raise the utility and standard of living
of participants in the economy. There are also a number of secondary objectives
which are held to lead to the maximization of income over the long run. While there
are variations between the objectives of different national and international entities,
most follow the ones detailed below:
a. Sustainability- a rate of growth which allows an increase in living standards
without undue structural and environmental difficulties. Economic growth will
be studied later on in this book.
b. Full employment- where those who are able a certain amount of job can get
one, given that there will be a certain amount of frictional, seasonal and
structural unemployment (referred to as the natural rate of unemployment).
c. Price stability- when prices remain largely stable, and there is not rapid
inflation or deflation. Price stability is not necessarily the same as zero
inflation, but instead steady levels of low-moderate inflation are often
regarded as ideal. It is worth noting that prices of some goods and services
often fall as inflation is only a measure of general price levels. However,
inflation is a good measure of price stability. Zero inflation is often
undesirable in an economy.

5
d. External Balance- equilibrium in the Balance of payments without the use of
artificial constraints. That is, exports roughly equal to imports over the long
run.
e. Equitable distribution of income and wealth- a fair share of the national
cake, more equitable than would be in the case of an entirely free market.
f. Increasing Productivity- more output per unit of labor per hour. Also since
labor is but one of many inputs to produce goods and services, it could also be
described as output per unit of factor inputs per hour.
1.4 Macroeconomic Policy Instruments
Macroeconomics studies how governments-pursuing specific objectives-can
uses their monetary, fiscal and income policy instruments to help stabilize the
economy. Macroeconomists attempt both to explain economic events and to devise
policies to improve economic performance.Macroeconomic policy instruments fall
within the realm of Macroeconomics policy.
The latter can be divided into two subsets:
a. Monetary policy and
b. Fiscal policy.
Monetary policy is conducted by the Federal Reserve or the central bank of a
country or supranational region. Fiscal policy is conducted by the Executive and
Legislative Branches of the Government and deals with managing a nation‘s Budget.
a. Monetary policy
Monetary policy instruments consist in managing short-term rates and
changing reserve requirements for commercial banks. Monetary policy can be either
expansive for the economy or restrictive for the economy (short-term rates low
relative to inflation rate) or restrictive for the economy (short-term rates high relative
to inflation rate). Historically, the major objective of monetary policy had been to
manage or curb domestic inflation.
More recently, central bankers have often focused on a second objective:
managing economic growth as both inflation and economic growth are highly
interrelated.

6
b. Fiscal policy
Fiscal policy consists in managing the national Budget and its financing so as
to influence economic activity. This entails the expansion or contraction of
government expenditures related to specific government programs. It also includes the
raising of taxes to finance government expenditures and the raising of debt to bridge
the gap (Budget deficit) between revenues (tax receipt) and expenditures related to the
implementation of government programs. Raising taxes and reducing the Budget
Deficit is deemed to be a restrictive fiscal policy as it would reduce aggregate demand
and slow down GDP growth. Lowering taxes and increasing the Budget Deficit is
considered an expansive fiscal policy that would increase aggregate demand and
stimulate the economy.
Summary
1. Microeconomics essentially examines how individual units, whether they be
desirable.
2. Macroeconomics studies the economy as a whole; it looks at the aggregate
economy.
3. While there are variations between the objectives of different national and
international entities, most follow the ones detailed below:
a. Sustainability
b. Full employment
c. Price stability
d. External Balance
e. Equitable distribution of income and wealth
f. Increasing Productivity
4. Monetary policy instruments consist in managing short-term rates (Fed Funds and
Discount rates in the U.S), and changing reserve requirements for commercial banks.
Monetary policy can be either expansive for the economy (short –term low relative
to inflation rate) or restrictive for the economy (short-term rates high relative to
inflation rate). Historically, the major objective of monetary policy had been to
manage or curb domestic inflation.

7
5. Fiscal policy consists in managing the national Budget and its financing so as to
influence economic activity. This entails the expansion or contraction of government
expenditures related to specific government programs. It also includes the raising of
taxes to finance government expenditures and the raising of debt to bridge the gap
(Budget deficit) between revenues (tax receipt) and expenditures related to the
implementation of government programs.
Key Terms
Microeconomics Full employment
Price stability Monetary policy
Fiscal policy Macroeconomics
Questions for Discussion and Exercises
1. Distinguish between the macroeconomics and microeconomics.
2. List the objectives of macroeconomics and explain.
3. Mention the instruments of macroeconomics and discuss.
4. What do you understand macroeconomics?
5. Briefly explain the objectives of the macro economy.

8
Chapter 2
The Expenditure and Income Component of GNP
Learning Objectives
 The concepts of the circular flow
 National income Accounting
 Computing GDP
a. Expenditure Method
b. Income Method
c. Output Method
 Nominal and Real GDP
2.1 National Income Accounting
Gross domestic product is often considered the best measure of how well the
economy is performing. The goal of GDP is to summarize in the money value of
economic activity in a given period of time. There are two ways to view this statistic.
One way to view,
1. GDP is as the total income of everyone in the economy.
2. GDP is as the total expenditure on the economy’s output of goods and
services.
To understand the meaning of GDP more fully, we turn to national income
accounting, the accounting system used to measure GDP and many related statistics.
Imagine an economy that produces single good, bread from a single input,
labor. Figure 2-1 illustrates all the economic transactions that occur between
households and firms in this economy. The inner loop in Figure 2-1 represents the
flows of bread and labor. The households sell their labor to the firms. The firms use
the labor of their workers to produce bread, which the firms in turn sell to the
households.

9
Hence, labor flows from households to firms and bread flows from firms to
households.
The outer loop in Figure 2-1 represents the corresponding flow of money. The
households buy goods from the firms. The firms use some of the revenue from these
sales to pay the wages of their workers, and the remainder is the profit belonging to
the owners of the firms (who themselves are part of the household sector). Hence,
expenditure on bread flows from households to firms, and income in the form of
wages and profit flows from firms to households. GDP measures the flow of money in
this economy.
GDP can be computed in two ways. GDP is the total income from the
production of bread, which equals the sum of wages and profit—the top half of the
circular flow of money. GDP is also the total expenditure on purchases of bread—the
bottom half of the circular flow of money.
To compute GDP, we can look at either the flow of money from firms to
households or the flow of money from households to firms.
These two ways of computing GDP must be equal because the expenditure of
buyers on products is, by the rules of accounting, income to the sellers of those
products. Every transaction that affects expenditure must affect income, and every
FirmsHouseholds
Labour
Income
Goods (breads)
Expenditures
Figure 2.1.The Circular Flow

10
transaction that affects income must affect expenditure. For example, suppose that a
firm produces and sells one more loaf of bread to a household.
Clearly this transaction raises total expenditure on bread, but it also has an
equal effect on total income. If the firm produces the extra loaf without hiring any
more labor (such as by making the production process more efficient), then profit
increases. If the firm produces the extra loaf by hiring more labor, then wages
increase. In both cases, expenditure and income increase equally.
2.2 Rules for Computing GDP
In an economy that produces only bread, we can compute GDP by adding up
the total expenditure on bread. Real economies, however, include the production and
sale of a vast number of goods and services. To compute GDP for such a complex
economy, it will be helpful to have a more precise definition: gross domestic product
(GDP) is the market value of all final goods and services produced within an
economy in a given period of time.
Gross Domestic Product can be calculated in three different ways:
(1) as the sum of all values added by all producers of both intermediate and
final goods and services –output based;
(2) as the income claims generated by the total production of goods and
services – income-based;
(3) as the expenditure needed to purchase all final goods and services during
the period – expenditures-based.
By standard accounting conventions these three aggregations define the same
total, as long as we add taxes on products (minus subsidies) to the first two in order to
measure GDP at market prices. Market prices are the prices paid by consumers.
a. The Components of Expenditure
Economists and policymakers care not only about the economy‘s total output
of goods and services but also about the allocation of this output among alternative
uses. The national income accounts divide GDP into four broad categories of
spending:
 Consumption (C)
 Investment (I)

11
 Government purchases (G)
 Net exports (NX)
Thus, letting Y stands for GDP,
Y= C+ I+ G+ NX
GDP is the sum of consumption (C), investment (I), government purchases
(G) and net exports (NX). Each dollar of GDP falls into one of these categories. This
equation is an identity—equations that must hold because of the way the variables are
defined. It is called the national income accounts identity.
Consumption consists of the goods and services bought by households. It is divided
into three subcategories: nondurable goods, durable goods, and services. Nondurable
goods are goods that last only a short time, such as food and clothing. Durable goods
are goods that last a long time, such as cars and TVs. Services include the work done
for consumers by individual and firms, such as haircuts and doctor visits.
Investment consists of goods bought for future use. Investment is also divided into
three subcategories: business fixed investment, residential fixed investment, and
inventory investment. Business fixed investment is the purchases of new plant and
equipment by firms. Residential investment is the purchases of new housing by
households and landlords. Inventory investment is the increase in firms‘ inventories of
goods (if inventories are falling, inventory investment is negative).
Government purchases are the goods and services bought by federal, state, and local
governments. This category includes such item as military equipment, highways and
the services that government workers provide. It does not include transfer payments to
individuals such as social security and welfare. Because transfer payments reallocate
existing income and are not made in exchange for goods and services, they are not
part of GDP.
Net exports takes into account trade with other countries.Net exports are the value of
goods and services exported to other countries minus the value of goods and services
that foreigners provide us. Net exports represent the net expenditure from abroad on
our goods and services, which provides income for domestic producers.
b. Other Measures of Income (Income Method)
The national income accounts include other measures of income that differ
slightly in definition from GDP. It is important to be aware of the various measures.

12
To obtain gross national product (GNP), we add receipts of factor income (wages,
profit, and rent) from the rest of the world and subtract payments of factor income to
the rest of the world:
GNP =GDP +Factor Payments from Abroad -Factor Payments to Abroad.
Whereas GDP measures the total income produced domestically, GNP
measures the total income earned by nationals (residents of a nation). For instance, if
a Japanese resident owns an apartment building in New York, the rental income he
earns is part of U.S. GDP because it is earned in the United States. But because this
rental income is a factor payment to abroad, it is not part of U.S. GNP. In the United
States, factor payments from abroad and factor payments to abroad are similar in size-
each representing about 3 percent of GDP- so GDP and GNP are quite close.
To obtain net national product (NNP), we subtract the depreciation of
capital— the amount of the economy‘s stock of plants, equipment, and residential
structures that wears out during the year:
NNP=GNP-Depreciation
In the national income accounts, depreciation is called the consumption of
fixed capital. It equals about 10 percent of GNP. Because the depreciation of capital is
a cost of producing the output of the economy, subtracting depreciation shows the net
result of economic activity. The next adjustment in the national income accounts is for
indirect business taxes, such as sales taxes. These taxes, which make up about 10
percent of NNP, place a wedge between the price that consumers pay for a good and
the price that firms receive. Because firms never receive this tax wedge, it is not part
of their income. Once we subtract indirect business taxes from NNP, we obtain a
measure called national income:
National Income = NNP- Indirect Business Taxes.
National income measures how much everyone in the economy has earned.
The national income accounts divide national income into five components,
depending on the way the income is earned. The five categories, and the percentage of
national paid in each category are:
 Compensation of employees (70%): The wages and fringe benefits earned by
workers.
 Proprietors’ income (9%): The income of no corporate businesses, such as
small farms, mom-and –pop stores and law partnerships.

13
 Rental income (2%): The income that landlord receive including the imputed
rent that homeowners ―pay‖ to themselves, less expenses such as depreciation.
 Corporate profit (12%): The income of corporations after payments to their
workers and creditors.
 Net interest (7%): The interest domestic businesses pay minus the interest they
receive, plus interest earned from foreigners.
A series of adjustments takes us from national income to personal income, the
amount of income that households and no corporate businesses receive. Three of these
adjustments are most important. First, we reduce national income by the amount that
corporations earn but do not pay out, either because the corporations are retaining
earnings or because they are paying taxes to the government. This adjustment is made
by subtracting corporate profits (which equals the sum of corporate taxes, dividends
and retained earnings) and adding back dividends. Second, we increase national
income by the net amount the government pays out in transfer payments. This
adjustment equals government transfers to individuals minus social insurance
contributions paid to the government. Third, we adjust national income to include the
interest that households earn rather than the interest that businesses pay. This
adjustment is made by adding personal interest income and subtracting net interest.
(The difference between personal interest and net interest arises in part from the
interest on the government debt. Thus, personal income is
Personal Income =National Income- corporate Profits- Social Insurance
Contributions - Net Interest +Dividends +Government Transfers to Individuals+
Personal Interest Income.
Next, if we subtract personal tax payments and certain no-tax payments to the
government (such as parking tickets), we obtain disposable personal income:
Disposable Personal Income=Personal Income-Personal Tax and Non-tax
Payments
Economists are interested in disposable personal income because it is the
amount households and non-corporate businesses have available to spend after
satisfying their tax obligations to the government.

14
c. Output Method
GNP can also be computed by adding up production of goods and services in
different industries. As we observe on the spending side, we must avoid counting the
same items more than once. Many industries specialize in the production of
intermediate goods that are used in the production of other goods. If we want each
industry‘s production to include the contribution of those industries to total GNP, then
we want to take the production of intermediate goods into account.
The concept of value added was developed to prevent double counting and to
attribute to each industry a part of the GNP. The value added by a firm is the
difference between the revenue the firm earns by selling its products and the amount it
pays for the products of other firms it uses as intermediate goods. It is a measure of
the value that is added to each product by firms at each stage of production.
For General Motors, for example, value added is the revenue from selling cars
less the amount it pays for steel glass and the other inputs it buys.
For a car dealer, value added is the revenue from selling cars less the
wholesale cost of the cars. The value added to a car by a car dealer takes the form of a
convenient showroom, sample selection, advice and final preparation and resting. The
car dealer produces these services by hiring sales people and car mechanics, renting
showroom and garage spaces, borrowing money to hold a big inventory of cars and
keeping the profits. Wages, rents, interest and profits are thus what make up value
added at each firm.
GNP is the sum of the vague added by all the firms in a country. If a firm sells
a final product, the sale appears in that firm‘s value added but does not appear
anywhere else. On the other hand, if a firm sells its output as an input for another
firm, that sale appears negatively in the other firm‘s value added. Products sold by
one firm to another are called intermediate products. When the two firms are added
together in the process of computing GNP, sales of intermediate products wash out.
When a firm imports a product, the transaction appears positively in the value added
of any other firm in that country.
A breakdown of real GNP of US in terms of the value added by various
industries is given in Table for 1985. These figures tell some interesting stories about
the modern US economy. We tend to think of the economy as producing goods- cars,
machines, and paper clips and so on but the sector that produces the most goods,
manufacturing, contributes only one fourth of GNP. The wholesale and retail trade

15
sector, whose only function is to take produced goods and make them available to the
public, is almost as large as the manufacturing sector. The finance, insurance and real
estate sector is another large one.
Table
Value Added by Industry in 1985 (billions of dollars)
Gross national product 4014.9
Gross domestic product 3974.2
Agriculture 92.0
Mining 114.2
Construction 186.6
Manufacturing 789.5
Transportation and utilities 374.1
Whole sale and retail estate 658.2
Finance, insurance and real estate 639.5
Services 648.1
Government 476.7
Statistical discrepancy -4.8
Rest of the world 40.7
Source: Economic report of the President, 1987
Near the bottom of the list is a small item called statistical discrepancy.
Although the value-added computation of GNP should give the same answer as total
spending, in practice there are measurement errors that cause a slight discrepancy
between the two.
One of the items in the list of the value added by industry is something called
rest of the world. How does the rest of the world figure in the computation of US
GNP, which is a national concept? The answer is that Americans contribute
productive services to other economies. They work overseas, and they own capital
used in other countries. The earnings of this type are counted as exports and the
corresponding value added is assigned to the sector called the rest of the world. The
result of including this item in GNP is to make GNP a measure of the output produced

16
by American-owned factors of production including factors they are actually used
overseas.
There is another concept, called gross domestic product (GDP), which omits
net earnings from the rest of the world GDP measures the output produced by factors
in the United States. While the distinction between and GDP is small for the United
States, it is large for some other countries. They typically use GDP to measure
production.
The national income of a country can be calculated according to the output
method by adding together the values of the net outputs or product, of its economic
sectors, Myanmar.
For example, have thirteen economic sectors, each with its own product value
(obtained by subtracting the value of each sector‘s raw materials or inter-industry use
value from the sector‘s output).The additional of these thirteen value added will yield
the GDP of Myanmar.
Since the product that has worn out and is obsolete should not be included in
estimating actual income, this depreciation in product valued must be subtracted from
the GDP, giving us the Net domestic product. Again, however, the difference between
exports and imports(X-M) must be added to or subtracted from the NDP to bring us
closer to the value of the Net National Product. Finally we must add the negative
value of NIPA or subtract its positive value to get the NNP or Net National Product.
2.3 Nominal and Real GDP
GDP valued at current prices is a nominal measure. GDP valued at base-
period prices is a real measure of the volume of national output and income.
Nominal GDP measures the dollar value of all the goods and services that an
economy produces during a specified time period. In 2000, for example, the nominal
GDP in the United States was $19876 billion. The word nominal means that the GDP
is measured in units of currency, such as pounds, marks, yen, kyat and so on.
ASE Economists construct a measure of real GDP to solve the problem of
changing price levels. Until recently, the most common way to compute real GDP
was to multiply the current quantity of output of each good by the price of that good
in a base year. Then all of these multiples were summed up to get the economy's
aggregate real GDP. Because the prices used in the calculation of real GDP do not
vary from year to year, the method just described yields a reasonable measure for the

17
changes over time in the overall level of production. One problem with this approach,
however, is that it weights the outputs of various goods by their relative prices in the
base year. These weights become less relevant over time as relative prices change,
and the response of the Bureau of Economic Analysis had been to make frequent
shifts in the base year used to calculate real GDP.
Summary
1. There are two ways to view this statistic. One way to view GDP is as the total
income of everyone in the economy. Another way to view GDP is as the total
expenditure on the economy’s output of goods and services.
2. Gross Domestic Product (GDP) can be calculated in three different ways:
(a) as the sum of all values added by all producers of both intermediate and final
goods and services –output based;
(b) as the income claims generated by the total production of goods and services –
income-based;
(c) as the expenditure needed to purchase all final goods and services during the
period – expenditures-based.
3. The national income accounts divide GDP into four broad categories of spending:
 Consumption (C)
 Investment (I)
 Government purchases (G)
 Net exports (NX)
4. Personal Income =National Income- Corporate Profits- Social Insurance
Contributions - Net Interest +Dividends +Government Transfers to Individuals+
Personal Interest Income.
5. GDP valued at current prices is a nominal measure. GDP valued at base-period
prices is a real measure of the volume of national output and income.
6. Nominal GDP measures the dollar value of all the goods and services that an
economy produces during a specified time period.
7. The national income of a country can be calculated according to the output method
by adding together the values of the net outputs or product, of its economic sectors,
Myanmar.
For example, have thirteen economic sectors, each with its own product value
(obtained by subtracting the value of each sector‘s raw materials or inter-industry use

18
value from the sector‘s output).The additional of these thirteen value added will yield
the GDP of Myanmar
.
Key Terms
Gross Domestic Product Personal income
Gross National Product Depreciation
Consumption Net national product
Investment Business tax
Government Purchase Net interest
Net export Real GDP
Compensation Expenditure
1. How can we measure our nation‘s economic performance?
2. Explain the expenditure approach to measuring GDP.
3. How do we compute GDP using the income approach?
4. How is personal income different from national income?

19
Chapter 3
Fluctuation in Real GNP
Learning Objectives
 The concepts of business cycles
 The phase of the business cycles
3.1 Business Cycles
Like People, the economy has moods. Sometimes it's in wonderful shape—it's
expansive; at other times, it's depressed. The economy's moods are associated with
various problems. Macroeconomics is the study of the aggregate moods of the
economy, specific focus on the problems associate with those moods—the problems
of growth, business cycles, unemployment, and inflation. These four problems are the
central concern of the macroeconomics.
In analyzing macroeconomic problems economists generally use two
frameworks—a short-run and a long-run framework. Issues of the growth are
generally considered in a long-run framework. Business cycles are generally
considered in a short-run framework.
What is difference between the two frameworks? The long run growth
framework focuses on supply because supply is so important in the long run, policies
that affect production-such as incentives that promote work, capital accumulation, and
technological change-are key. The short run business cycle framework focuses on
demand. Much of the policy discussion short run business cycles focus on ways to
increase or decrease components of aggregate expenditures such as policies to get
consumers and businesses to increase their spending.
The term business cycle or economic cycle refers to the fluctuations of
economic activity (business fluctuations) around its long-term growth trend. The
cycle involves shifts over time between periods of relatively rapid growth of output
(recovery and prosperity), and periods of relative stagnation or decline (contraction or
recession). These fluctuations are often measured using the real gross domestic
product. Despite being termed cycles, these fluctuations in economic growth and
decline do not follow a purely mechanical or predictable periodic pattern. While the

20
secular, or long terms trend is a 2.5 to 3.5 percent increase in GDP, there are
numerous fluctuations around that trend. Sometimes real GDP is above the trend; at
other times GDP is below the trend. This phenomenon has given rise to term business
cycle. A business cycle is the upward or downward movement of economic activity
that occurs around the growth trend.
One way of defining the business cycle is that it is the fluctuations in output
around its trend. The production function tells us that for a given level of capital,
labor and technology, a certain amount of output can be produced. This is what we
have referred to as the trend level of output. However, at any point in time, output
does not have to equal its trend value. Firms can always produce less output if they do
not work at full capacity or if they do not work their labor forces at full efficiency
during its working shift. Therefore, output can always be below this trend level. But
output can also exceed the trend level predicted by the production function. For
instance, workers can be persuaded to work overtime for short periods and machines
can be utilized at more than full capacity during intense periods of production. Firms
cannot maintain these high levels of indefinitely- eventually the workforce needs a
rest, and if machines are used too intensively they will break down and there will be
stoppages. However, for short periods, this intensive use of factors of production
enables output to be above its trend. These fluctuations of output above and below the
trend level provide one definition of the business cycle. When output is above trend,
the economy is in the boom phase of the cycle, and when it is significantly below
trend, the economy is in recession.
Until the late 1930s, economists took such cycles as facts of life. They had no
convincing theory to explain why business occurred, nor did they have policy
suggestions to smooth them out. In fact, they felt that any attempt to smooth them
through government intervention would make the situation worse.
Since the 1940s, however, many economists have not taken business cycles as
facts of life. They have hotly debated the nature and causes of business cycles and of
the underlying growth. Classical economists argue that fluctuations in economic
activity are to be expected in a market economy. Indeed, they say, it would be strange
if fluctuations did not occur when individuals are free to decide what they want to do.
People should simply accept these fluctuations. Keynesian economists argue that
fluctuations can and should be controlled. They argue that expansions (the part of the
business cycle above the long-term trend) and contractions (the part of the cycle

21
below the long-term trend) are symptoms of underlying problems of the economy,
which should be dealt with government actions. Classical economists respond that
individuals will anticipate government's reaction, thereby undermining government's
attempts to control cycles. Which of these two views is correct is still a matter of
debate.
3.2 The Phase of the business cycles
Business cycles have varying durations and intensities, but economists have
developed a terminology to describe all business cycles and just about any position on
a given business cycle. Figure 3.1 gives a visual representation of a business cycle.
The top of a cycle is called the peak. A boom is a very high peak,
representing a big jump in output. That is when the economy is doing great. Most
everyone who wants a job has one. Eventually an expansion peaks.
A downturn describes the phenomenon of economic activity starting to fall
from a peak. In a recession the economy isn't doing so great and many people are
unemployed. A recession is generally considered to be a decline in real output that
persists for more than two consecutive quarters of a year.
A depression is a large recession. There is no formal line indicating when a
recession becomes a depression. In general, a depression is much longer and more
Trough
Expansion ExpansionRecession
Downturn Upturn
Peak
Boom
Growth
trend
Time
0
Figure 3.1 Phases of Business cycle
Total
output

22
severe than a recession. If unemployment exceeds 12 percent for more than a year, the
economy is in a depression.
The bottom of a recession or depression is called the trough. As total output
begins to expand, the economy comes out of the trough; economists say it's
in an upturn, which may turn into an expansion—an upturn those last at least two
consecutive quarters of a year. An expansion leads economy back up to the peak.
This terminology is important because if you are going to talk about the state
of the economy. Businesses are so interested in the state of the economy because they
want to be able to predict whether it's going into a contraction or an expansion.
Making the right prediction can determine whether the business will be profitable or
not.
3.3 Leading Indicators
Economist have developed a set of signs that indicate when a recession is
about to occur and when the economy is in one. These signs are called leading
indicators—indicators that tell what‘s likely to happen 12 to 15 months from now.
They include:
1. Average workweek for production workers in manufacturing
2. Average weekly claims for unemployment insurance.
3. Manufacturers‘ new orders for consumer goods and materials.
4. Vendor performance, measured as a percentage of companies reporting slower
deliveries from suppliers
5. Index of consumer expectations.
6. New orders for non-defence capital goods.
7. Number of new building permits issued for private housing units.
8. Stock prices—500 common stocks.
9. Interest rate spread—10 year government bond less central bank rate.
10. Money supply, M2
Economists use leading indicators in making forecasts about the economy.
They are called indicators, not predictors, because they are only rough approximations
of what‘s likely to happen in the future.

23
Summary
1. The term business cycle or economic cycle refers to the fluctuations of
economic activity (business fluctuations) around its long-term growth trend. A
business cycle is the upward or downward movement of economic activity that occurs
around the growth trend.
2. The top of a cycle is called the peak. A boom is a very high peak,
representing a big jump in output. That is when the economy is doing great. Most
everyone who wants a job has one. Eventually an expansion peaks.
3. A downturn describes the phenomenon of economic activity starting to fall
from a peak. In a recession the economy isn't doing so great and many people are
unemployed. A recession is generally considered to be a decline in real output that
persists for more than two consecutive quarters of a year.
4. A depression is a large recession. There is no formal line indicating when a
recession becomes a depression. In general, a depression is much longer and more
severe than a recession. If unemployment exceeds 12 present for more than a year, the
economy is in a depression.
5. The bottom of a recession or depression is called the trough. As total output
begins to expand, the economy comes out of the trough; economists say it's
in an upturn, which may turn into an expansion—an upturn those last at least two
consecutive quarters of a year. An expansion leads economy back up to the peak.
Key Terms
Business cycle fluctuation
Peak boom
Recession depression
Trough economic activity
Expansion
1. What are the four stages of business cycles? Explain.
2. Write on the following terms
(a)Recession
(b)Business cycle

24
Chapter 4
Aggregate demand and supply
Learning Objectives
 Definition of Aggregate Demand
 Definition of Aggregate Supply
 Market Equilibrium
 Market Failure
 Shift Factors of demand and supply curves
4.1 Aggregate demand
The total quantity of output demanded at alternative price levels in a given
time period, ceteris paribus. Economists use the term "aggregate demand‖ to refer to
the collective behaviors of all buyers in the market place. Specially, aggregate
demand refers to the various quantities of output that all market participants are
willing and able to buy at alternative price levels in a given period. The view here
encompasses the collective demand for all goods and services, rather than the demand
for any single good.
With their income in hand, people then enter the product market. If goods and
services are cheap, people will be able to buy more with their given income. High
price will limit both the ability and willingness to purchase goods and services. Note
that we are here talking about average price level not the price of any single
good.

25
This simple relationship between average prices and real spending is
illustrated in figure 4.1. The various quantities of output (Real GDP) that might be
purchased are depicted on the horizontal axis. It is referring to real GDP, an inflation-
adjusted measure of physical output. Prices levels are measured on the vertical axis.
Specially, Figure 4.1 depicts alternative levels of average prices.
The aggregate demand curve in figure 4.1 has familiar shape. The aggregate
demand curve illustrates how the volume of purchases varies with average price. The
downward slope of the aggregate demand curve suggests that with a given (constant)
level of income, people will buy more goods and services at lower prices. The curve
doesn't tell which goods and services people will buy; it is simply indicates the total
volume (quantity) of their intended purchases.
A downward-sloping demand curve requires a distinctly macro explanation.
That explanation includes three separate phenomena:
a. Real balances effect: The primary explanation for the downward slope of the
aggregate demand curve is that cheaper prices make dollars more valuable.
That is to say, the real value of the money is measured by how many goods
and services each dollar will buy. In this report, lower price make you richer:
the cash balances you hold in your pocket, in your bank account are worth
more the price levels falls.
When their real incomes and wealth increase because of a decline in the price
level, consumers respond by buying more goods and services. They end up
0 Real Output (quantity per year)
Aggregate
demand
Figure 4.1 Aggregate Demand Curve
Price level
(Average price)

26
saving less of their incomes an spending more. This causes the aggregate
demand curve to slope downward to the right.
b. Foreign trade effect: The downward slope of the aggregate demand curve is
reinforced by changes in imports and exports. When Myanmar- made products
become cheaper, Myanmar consumers will buy fewer imports and more
domestic output. Foreigners will also step up their purchases of the Myanmar-
made goods when prices are falling in Myanmar.
The opposite is true as well. When domestic price level rises, Myanmar
consumers are likely to buy more imports. At the same time, foreign
consumers may cut back on their purchases of Myanmar-made products.
c. Interest-rate effect: Changes in the price level also affect the amount of money
people need to borrow; and so tend to affect interest rates. At lower price
levels, consumer borrowing needs are smaller. As the demand for loans
diminishes, interest rates tend to declines as well. This cheaper money
stimulates more borrowing and loan-financed purchases. The combined forces
of the real-balances, foreign-trade, and interest-rate effects give the aggregate
demand curve its downward slope. People buy a larger volume of output when
the price level falls (ceteris paribus).
4.2 Aggregate Supply
The total quantity supplied of output producers are willing and able to supply
at alternative price levels in a given time period, (ceteris

27
paribus).
While lower price levels tend to increase the volume of output demanded, they
have the opposite effect on the aggregate quantity supplied.
Profit Margins: If the price level falls, producers as a group are being squeezed. In
the short run, producers are saddled with some relatively constant costs like rent,
interest payments, negotiated wages and inputs already contracted for. If output prices
fall, producers will be hard-pressed to pay these costs, much less earn a profit. Their
response will be to reduce the rate of output.
Rising output price have the opposite effect. Because many costs are relatively
constant in the short run, higher prices for goods and services tend to widen profit
margins. As profit margin widen, producers will want to produce and sell more goods.
Thus, we expect the rate output to increase when the price level rises. This
expectation is reflected in the upward slope of the aggregate supply curve in Figure
4.2. Aggregate supply reflects the various quantities of real output that firms are
willing and able to produce at alternative price level, in a given time period.
Cost: The upward slope of the aggregate supply curve is also explained by rising
costs. To increase the rate of output, producers must acquire more resources (eg.
Labor) and use existing plant and equipment more intensively. These greater strains
on productive capacity tend to raise production costs. Producers must therefore charge
Aggregate supply
Figure 4.2 Aggregate Supply Curve
Price level
(Average price)

28
higher prices to recover the higher costs that accompany increased capacity
utilization.
Cost pressures tend to intensify as capacity is approached. If there is a lot of
excess capacity, output can be increased with little cost pressure. Hence, the lower
end of aggregate supply (AS) curve is fairly flat. Producers may have to pay over-
time wages, raise base wages, and pay premium prices to get needed inputs. This is
reflected in the steepening slope of the AS curve at higher output levels.
4.3 Macro Equilibrium
Macro equilibrium is the combination of price level and real output that is
compatible with both aggregate demand and aggregate supply.
In Figure 4.3, Instead of describing the behavior of buyers and sellers in a
single market, aggregate supply and demand curves summarize the market activity of
het whole (macro) economy. These curves tell what total amount of goods and
services will be supplied of demanded at various prices levels.
The aggregate demand and supply curves intersect at only one point (E). At
that point, the price level (PE) and output (QE) combination is compatible with both
buyers' and sellers' intention. The economy will gravitate to those equilibrium price
(PE) and output (QE) levels. We call this situation macro equilibrium-the unique
Aggregate
supply
Figure 4.3 Macro Equilibrium
Price level
(average
price)
PE
Aggregat
e demand
Equilibrium
P1
QE S1D1 QF
E

29
combination of price level and output that is compatible with both buyers' and sellers'
intention.
At any other price level, the behavior of buyers and sellers is incompatibles.
Suppose that the price level is P1, People would want to buy only the quantity D1 at
the higher price level P1. In contract, business firms would want to sell a larger
quantity S1. This is a disequilibrium situation. Accordingly, a lot of goods will remain
unsold at price level P1.
To sell these goods, producers will have to reduce their prices. As prices drop,
producers will decrease the volume of goods sent to market. At the same time, the
quantities that consumers seek will increase. This adjustment process will continue
until point E is reached and the quantities demanded and supplied are equal. At that
point, the lower price level PE will prevail. The same kind of adjustment process
would occur if a lower level first existed.
Equilibrium is unique; it is the only price-output combination that mutually
compatible with aggregate supply and demand.
4.4 Macro Failure
There are two potential problems with the macro equilibrium depicted in
Figure 4.3.
Undesirability: The price-output relationship at equilibrium may not satisfy
macroeconomic goals.
PE
QF
Aggregate
supply
Figure 4.3 Macro Equilibrium
Price level
(average price)
Aggregate
demand
Equilibrium
QE
E
Full employment
.FP*--

30
If full-employment output is QF that is society's full-employment goals, at the
equilibrium point E in figure 4.3. The economy is not fully utilizing its production
possibilities. The short fall in equilibrium output implies that the economy will be
burdened with cyclical unemployment. Full employment is attained only if we
produce at QF. Some workers can't find Jobs.
Similar problems may arise with the equilibrium price level. Suppose that P*
represents the most desired price level. In figure, the equilibrium price level PE
exceeds P*. If a market behavior determines prices, the price level rises above the
desired level. The resulting increase in average prices is what we call inflation.
Instability: Even if the designated macro equilibrium is optimal, it may be displaced
by macro disturbances. Suppose that the macro equilibrium yielded the optimal levels
of employment and prices (see figure 4.4). However, this equilibrium doesn't ensure
because the aggregate demand and supply curve are not necessarily permanent. They
can shift and they will, whenever the behaviors of buyers and sellers change.
AS1
AS2
Figure 4.4a Supply Shift
Price level
(average
price)
AD1
E
P2
P*
G
Full employment
Q2 QF

31
For example, when US invaded Iraq in March 2003, the price of oil shot up.
This oil price hike directly increased the cost of production. Thus the aggregate
supply curve shifted to the left, in Figure 4.4a. The impact of a leftward supply shift
on the economy is evident. The new equilibrium was located at point G. At point G,
less output was produced and prices were higher. Full employment and price stability
vanished. This is the kind of the "external shock" that can destabilize any economy.
A shift of the AD curve could do similar damage. Suppose stock plunged
tomorrow. Consumers might decide to save more and spend less as seeing their
accumulated wealth vanish. At any price level, fewer goods and services would be
demanded. This change in consumer behavior would be reflected in a leftward shift of
the aggregate demand curve, as in Figure 4.4b. The resulting disturbance would knock
the economy out of its equilibrium at point E, leaving us at point H with less output.
4.5 Shift Factors
Demand shift- The aggregate demand curve might shift, for example, if
consumer sentiment changed. A stock market plunge might shatter consumer
confidence, causing consumers to pare their spending plans. A tax high might have a
similar effect. Higher taxes reduce disposable incomes, forcing consumers to cut back
spending. Higher interest rates make credit-financed spending more expensive and so
might also reduce aggregate demand. These shifts made it difficult to reach or
maintain full employment.
H
AS1
AD2
Figure 4.4b Demand Shift
Price level
(average price)
AD1
E
P2
P*
Q2 QF

32
Supply shift- External forces may also shift aggregate supply. Rising world oil
prices are making producers less willing to supply output at given price level. Higher
business taxes could also discourage production, thereby shifting the aggregate supply
curve to the left. Tougher environmental or workplace regulations could also raise the
cost of doing business, inducing less supply at a given price level. On the other hand,
more liberal immigration rules might increase the supply of labor and increase the
supply of goods and services. (a rightward shift).
Summary
1. The total quantity of output demanded at alternative price levels in a given
time period, ceteris paribus. aggregate demand refers to the various quantities of
output that all market participants are willing and able to buy at alternative price
levels in a given period.
2. Real balances effect: The primary explanation for the downward slope of the
aggregate demand curve is that cheaper prices make dollars more valuable.
3. Foreign trade effect: The downward slope of the aggregate demand curve is
reinforced by changes in imports and exports.
4. Interest-rate effect: Changes in the price level also affect the amount of money
people need to borrow: and so tend to affect interest rates.
5. The total quantity supplied of output producers are willing and able to supply
at alternative price levels in a given time period, (ceteris paribus).
6. Aggregate supply reflects the various quantities of real output that firms are
willing and able to produce at alternative price level in a given time period.
7. Macro equilibrium is the combination of price level and real output that is
compatible with both aggregate demand and aggregate supply.
8. Demand shift- The aggregate demand curve might shift, for example if
consumer sentiment changed.
- A stock market plunge might shatter consumer confidence, causing consumers
to pare their spending plans.
- Higher taxes reduce disposable incomes, forcing consumers to cut back
spending.
- Higher interest rates make credit-financed spending more expensive and so
might also reduce aggregate demand.

33
9. Supply shift- External forces may also shift aggregate supply.
- Rising world oil prices are making producers less willing to supply output at
given price level.
- Higher business taxes could also discourage production, thereby shifting the
aggregate supply curve to the left.
10. Tougher environmental or workplace regulations could also raise the cost of
doing business, inducing less supply at a given price level.
11. More liberal immigration rules might increase the supply of labor and increase
the supply of goods and services. (a rightward shift).
Key Terms
Aggregate Demand Aggregate Supply
Real balance effect Interest rate effect
Equilibrium Foreign trade effect
Real output
1. Why is the aggregate demand curve downward sloping? Explain.
2. Why is the aggregate supply curve positively slope? Explain.
3. Explain the shift factor of AD and AS.
4. How is the macroeconomic equilibrium determined?

34
Chapter 5
Unemployment
Learning Objectives
 Definition of Labour force
 Unemployment rate
 Types of unemployment
 The policy goal
5.1 The Labour Force
The labour force consists of everyone over the age of 16 who is actually
working plus all those who are not working but are actively seeking employment. As
figure shows, only half of the population participates in the labour market. The rest of
the population (non-participants) are too young, in school, retired, sick or disabled,
institutionalized, or taking care of household needs.
Note that definition of labour force participation excludes most household and
volunteer activities. A woman who chooses to devote her energies to household
responsibilities or unpaid charity work is not counted as part of the labour force, no
matter how hard she works. Because she is neither in paid employment nor seeking
Labour Force
Employed
Unemployed
Under 16
Total Population
Homemakers
in school
Retired
Sick & disable
Institutionalized
Others
Figure 5.1 Total Population and Labour Force

35
such employment in the market place, she is regard as outside the labour market (a
non-participant). But if she decides to seek a paid job outside the home and engages in
an active job search, we would say that she is "entering labour force". Students, too,
are typically out of the labour force until they leave school and actively look for work,
either during summer vacation or after graduation.
5.2 The Unemployment Rate
Unemployment rate is the proportion of the labour force that is unemployed.
To access how well labour-force participants are faring in the macro economy, we
compute the unemployment rates as:
Unemployment rate: The proportion of the labour force that is unemployed.
The Natural rate of unemployment is the percentage of the labour force that
can normally be expected to be unemployed for reasons other than cyclical
fluctuations. In other words, the natural rate of unemployment rate is the sum of
seasonal, frictional and structural unemployment expected over the year. When the
actual rate of unemployment is less than the natural rate of unemployment, the
economy operates at full employment. The natural rate of unemployment is the
unemployment that occurs as a normal part of the functioning of the economy. To be
counted as unemployed, a person must not only be jobless but also actively looking
for work.
5.3 Types of Unemployment
Seasonal Unemployment: Seasonal variation in employment conditions are a
persistent and inevitable source of unemployment. Some Joblessness is inevitable as
long as we continue to grow crops, build house, or go skiing at certain seasons of the
year. At the end of these seasons, thousands of workers must go searching for new
jobs, experiencing some seasonal unemployment in the process.
Frictional Unemployment: are other reasons for prescribing some amount of
unemployment. Many workers have sound financial or personal reasons for leaving
Unemployment rate =
Number of unemployed people
Size of the labour force

36
one job to look for another. In the process of moving from one job to another; a
person may well miss a few days or even weeks of work without any serious personal
or social consequences. On the contrary, people who spend more time looking for
work may find better jobs.
The same is true of students first entering the labour market. If you spend some time
looking for work, you are more likely to find a job you like. The job are available, hat
skills they require and what they pay. Accordingly a brief period of job search for
persons entering the labour market may benefit both individual involved and larger
economy. The unemployment associated with this kind of job search is referred to as
frictional unemployment.
Frictional unemployment: unemployment caused by new entrants into the job
market and people quitting a job just long enough to look for and find another one.
Structural Unemployment: For many job seekers, the period between jobs may drag
on for months or even years because they do not have the skills that employers
require. In early 1980s, the steel and auto industries downsized, eliminating over half
a million jobs in US. The displaced workers had years of work experiences. But their
specific skills were no longer in demand. They were structurally unemployed. High
school dropouts suffer similar problems. They simply don‘t have the skill that today‘s
jobs require. When such structural unemployment exists, more job creation alone
won‘t necessarily reduce unemployment. On contrary, more job demand might simply
push wages higher for skilled workers, leaving unskilled workers unemployed.
Structural Unemployment: unemployment cause by the institutional structure of an
economy or by economic restructuring making some skills obsolete.
Cyclical Unemployment: Cyclical Unemployment refers to the joblessness that occurs
when there simply not enough jobs to go around. Cyclical unemployment exists when
the number of workers demand falls short of the number of persons in the labour
force. This is not a case of mobility between jobs or even of job seekers‘ skills.
Rather, it is simply an inadequate level of demand for goods and services and thus for
labour. Cyclical Unemployment: unemployment resulting from fluctuation in
economic activity.

37
5.4 The Policy Goal
We have seen that zero unemployment is not an appropriate goal. However,
there is no total agreement about the level of unemployment that constitutes full
employment. Most macro economists agree, however, that the optimal
unemployment rate lies some where between 4 and 6 percent.
Full employment: the lowest rate of unemployment compatible with price stability:
variously estimated at between 4 and 6 percent unemployment.
Unemployment, GDP and Okun’s Law
What relationship should we except to find between unemployment and real
GDP? Because employed workers help to produce goods and services unemployed
workers do not, increases in the unemployment rate should be associated with
decrease in real GDP. This negative relationship between unemployment and GDP is
called Okun’s law, after Arthur Okun, the economist who first studied it. The
magnitude of the Okun‘s law relationship tells us that
Percentage Change in Real GDP
= 3% − 2 × Change in the Unemployment Rate.
If the unemployment rate remains the same, real GDP grows by about 3
percent; this normal growth in the production of goods and services is a result of
growth in the labor force, capital accumulation, and technological progress. In
addition, for every percentage point the unemployment rate rises, real GDP growth
typically falls by 2 percent. Hence, if the unemployment rate rises from 6 to 8 percent,
then real GDP growth would be
Percentage Change in Real GDP = 3% − 2 × (8% − 6%) = −1%.
In this case, Okun‘s law says that GDP would fall by 1 percent, indicating that
the economy is in a recession.
Summary
1. The labour force consists of everyone over the age of 16 who is actually
working plus all those who are not working but are actively seeking employment.
2. Unemployment rate: The proportion of the labour force that is unemployed.
3. Seasonal Unemployment: Seasonal variation in employment conditions are a
persistent and inevitable source of unemployment.

38
4. Frictional unemployment: unemployment caused by new entrants into the job
market and people quitting a job just long enough to look for and find another one.
5. Structural Unemployment: unemployment cause by the institutional structure
of an economy or by economic restructuring making some skills obsolete.
6. Cyclical Unemployment: unemployment resulting from fluctuation in
economic activity.
7. The Natural rate of unemployment is the percentage of the labour force that
can normally be expected to be unemployed for reasons other than cyclical
fluctuations. The natural rate of unemployment rate is the sum of seasonal, frictional
and structural unemployment expected over the year.
8. When the actual rate of unemployment is less than the natural rate of
unemployment, the economy operates at full employment.
9. The natural rate of unemployment is the unemployment that occurs as a
normal part of the functioning of the economy.
Key Terms
Labour force Employment
Full employment Seasonal unemployment
Frictional unemployment Structural unemployment
Cyclical unemployment The natural rate of unemployment
1. Mention the types of unemployment and explain any two of them.
2. Define the following terms
(a) Seasonal unemployment
(b)Frictional unemployment
(c) Structural unemployment
(d) Cyclical unemployment
3. Define the labour force and how to calculate the unemployment rate.
4. How do you understand the natural rate of unemployment?

39
Chapter 6
Economic Growth and Its Sources
Learning Objectives
 Definition of growth
 The sources of growth
a. Capital accumulation
b. Available resources
c. Compatible institutions
d. Technological development
e. Entrepreneurship
6.1 Growth and the Economy's Potential Output
Economists use changes in real GNP-- the market value of final goods and
services produced in an economy, stated in the prices of a given year—as the primary
measurement of the growth. When people produce and sell their goods, they earn
income, so when an economy is growing: both total output and total income are
increasing. Such growth gives most people more this year than they had last year.
Growth is an increase in the amount of goods and services an economy
produces. Growth is an increase in potential output__ the highest amount of output an
economy can produce from the existing production function and the existing
resources.
To take into account population growth in economic growth, another measure
of growth—change in per capita real output is used. Per capita real output is real
GDP divided by the total population. Output per person is an important measure of
growth because, while total output may be increasing, the population could be
growing so fast that per capita real output is falling.
In the long run, economists consider an economy's potential output
changeable. Growth analysis is a consideration of why an economy's potential shifts
out, and growth policy is aimed at increasing an economy's potential output.

40
6.2 The Sources of Growth
Economists have determined five important sources of growth:
1. Capital accumulation – investment in productive capacity
2. Available resources
3. Growth- compatible institutions
4. Technological development
5. Entrepreneurship
a. Investment and Accumulation of Capital
As one point, capital accumulation (where capital was thought of as just
physical capital) and investment were seen as the key elements in growth. Physical
capital includes both private capital- buildings and machines available for production-
and public capital- infrastructure such as highways and water supply. The flow of
investment leads to the growth of stock of capital. While physical capital is still
considered a key element in growth, it is now generally recognized that the growth
recipe is far more complicated. One of the reasons for de-emphasis on capital
accumulation is that empirical evidence has suggested that capital accumulation
doesn't necessarily lead to growth. Another reason is that products change, and
buildings and machines useful in one time period may be useless in another (e.g., a six
-year -old computer often is worthless). The value of the capital stock depends on its
future expected earnings, which are very uncertain. Capital's role in growth is
extraordinarily difficult to measure with accuracy.
A third reason is that it has become clear that capital includes much more than
machines. In addition to physical capital, modern economics includes human capital
(the skills that are embodied in workers through experience, education and on the job
training or more simply, people‘s knowledge) and social capital (the habitual way of
doing things that guides people in how they approach production) as types of capital.
The importance of human capital is obvious: A skilled labour force is far more
productive than an unskilled labour force. Social capital is embodied in institutions
such as the government, the legal system, and the fabric of society, despite this
modern de-emphasis on investment and physical capital, all economists agree the
right kind of investment at the right time is central element of growth. If an economy

41
is to grow it must invest. The debate is about what kinds and what times arte the right
ones.
b. Available Resources
If an economy is to grow it will need resources. The United States grew in the
20th century because it had a major supply of many natural resources, and it imported
people, a resource it needed. However, resources in one time period may not be a
resource in another. For example, at one time oil was simply black gooey stuff that
made land unusable. When people learned that the black gooey stuff could be burned
as fuel, oil became a resource. What‘s considered a source depends on technology.
Creativity can replace resources, and if you develop new technology fast enough, you
can overcome almost any lack of existing resources. Even if a country doesn‘t have
the physical resources it needs for growth, it can import them- as did Japan following
World War II.
Greater participation in the market is another means by which to increase
available resources. In China at the end of the 20th
century, for example, many
individuals migrated into the southern provinces, which have free trade sectors.
Before they migrated they became employed in the market economy. This increased
the labour available to the market, helping push up China‘s growth rate.
c. Growth-Compatible Institutions
Growth-Compatible Institutions- Institutions that faster growth- must have
incentives built into them that lead people to put forth effort and discourage people
from spending a lot of their time in leisure pursuits or creating impediments for others
to gain income for themselves. When individuals get much of the gains of growth
themselves, they have incentives to work harder. That's why markets and private
ownership of property play important role in growth. Another growth-compatible
institution is corporation, a legal institution that gives owners limited liability and
thereby encourages large enterprises (because people are more willing to invest their
savings when their potential losses are limited).
d. Technological Development
Advance in technology shift the production possibility curve out by making
workers more productive. Technological advances increase their ability to produce

42
more of the things they already produce but also allow them to produce new and
different products. Technology progress results from new and improved ways of
accomplishing traditional tasks such as growing crops, making clothing or building a
house. There are three basic classifications of technological progress: neutral, labour-
saving and capital-saving.
Neutral technological progress occurs when higher output levels are achieved
with the same quantity and combinations of factor inputs. Simple innovations like
those that arise from the division of labour can result in higher total output levels and
greater consumption for all individuals.
By contrast, technological progress may result in savings of either labour or
capital. Computers, the internet, automated looms, high-speed electric drills, tractors,
mechanical ploughs__ these and many other kinds of modern machinery and
equipment can be classified as products of laboursaving technological progress.
Capital-saving technological progress is a much rarer phenomenon. In the
labour –abundant (capital scarce) developing countries, however, capital-saving
technological progress is what is needed most. Such progress results in more efficient
(lower-cost) labour intensive method of production. For example, hand or rotary
powered wielders and threshers food- operated bellows pumps and back mounted
mechanical sprayers for small scale agriculture. The indigenous LDC development of
low-cost, efficient, labour-intensive (capital saving) techniques of production is one of
the essential ingredients in any long-run employment-oriented development strategy.
e. Entrepreneurship
Entrepreneurship is ability to get things done. That ability involves creativity,
vision, willingness to accept risk, and a talent for translating that vision into reality.
Entrepreneurs have been central to growth. They have created large companies,
produced new products and transformed the landscape of the economy.
Summary
1. Growth is an increase in the amount of goods and services an economy
produces. Growth is an increase in potential output__ the highest amount of output an
economy can produce from the existing production function and the existing
resources.

43
2. Physical capital includes both private capital- buildings and machines
available for production- and public capital- infrastructure such as highways and
water supply. The flow of investment leads to the growth of stock of capital. While
physical capital is still considered a key element in growth, it is now generally
recognized that the growth recipe is far more complicated.
3. (a)One of the reasons for de-emphasis on capital accumulation is that
empirical evidence has suggested that capital accumulation doesn't necessarily lead to
growth.
(b)Another reason is that products change, and buildings and machines useful
in one time period may be useless in another (e.g., a six -year -old computer often is
worthless). The value of the capital stock depends on its future expected earnings,
which are very uncertain. Capital's role in growth is extraordinarily difficult to
measure with accuracy.
(c) A third reason is that it has become clear that capital includes much more
than machines. In addition to physical capital, modern economics includes human
capital and social capital as types of capital.
4. The importance of human capital is obvious: A skilled labour force is far more
productive than an unskilled labour force.
5. If an economy is to grow it will need resources. The United States grew in the
20th century because it had a major supply of many natural resources, and it imported
people, a resource it needed. However, resources in one time period may not be a
resource in another.
6. Growth-Compatible Institutions- Institutions that faster growth- must have
incentives built into them that lead people to put forth effort and discourage people
from spending a lot of their time in leisure pursuits or creating impediments for others
to gain income for themselves. When individuals get much of the gains of growth
themselves
7. Advance in technology shift the production possibility curve out by making
workers more productive. Technological advances increase their ability to produce
more of the things they already produce but also allow them to produce new and
different products.
8. There are three basic classifications of technological progress: neutral, labour-
saving and capital-saving.

44
9. Entrepreneurship is ability to get things done. That ability involves creativity,
vision, willingness to accept risk, and a talent for translating that vision into reality.
Key Terms
Growth Potential output
Per capita real output Capital accumulation
Resources Technology
Entrepreneurship Neutral
Capital saving technology Labour saving technology
1. What is ―Growth‖?
2. List the five important sources of growth and explain two of them.
3. Classify the technological progress and explain them.
4. ―Capital accumulation and investment were seen as the key elements in growth‖.
Discuss.
5. Define economic growth and explain the available resources.

45
Chapter 7
The Price level and Inflation
Learning Objectives
 Definition of Inflation
 Definition of Deflation
 Definition of Hyperinflation
 Measurement of Inflation
 The CPI & GDP deflator
 Cost of inflation & effects of inflation
7.1 Definition of Inflation
Inflation is a continual rise in the price level. The price level is an index of all
prices in the economy. Even when inflation itself isn‘t a p4oblem, the fear of inflation
guides macroeconomic policy. Fear of inflation prevents government from expanding
the economy and reducing unemployment. It prevents governments from using
macroeconomic policies to lower interest rates. One-time rise in the price level is not
inflation. If the price level goes up 10 percent in a month, but then remains constant,
the economy doesn‘t have an inflation problem. Inflation is an ongoing rise in the
price level.
The price level is an indication of how high or low prices are on average in a
given year compared to prices on average in a certain base period. The price level is
measured by a price index whose value is set at 100 for a base period.
- Deflation is a decrease in the overall price level. Prolonged periods of
deflation can be just as damaging for the economy as sustained inflation.
- Hyperinflation is a period of very rapid increases in the overall price level.
Hyperinflations are rare, but have been used to study the costs and
consequences of even moderate inflation.

46
7.2 Measurement of Inflation
Since inflation is a sustained rise in the general price level, the general price
level at a given time was get by creating a price index, a number that summarizes
what happens to a weighted composite of prices of a selection of goods over time.
Price indexes measure the cost of purchasing a bundle of commodities. However,
different agents buy different bundles of commodities, and each bundle defines a
different price index.
There are a number of different measures of the price4 level. The most
important indexes are a. Consumer Price Indexes (CPIs), b. Producer Price Index
(PPI) and c. GDP deflator.
The Consumer Price Index
Consumer Price Index (CPI) which measure the cost to the consumer of
purchasing a representative basket of commodities. This basket includes both goods
and services; commodities purchased in shops, through mail order or the Internet, and
commodities produced either domestically or from abroad. Consumer prices also
include any consumption taxes (e.g., general sales tax or goods and services tax
(GST) or value added tax (VAT)). The CPI is the most important inflation measure
because central banks often use it as policy target. Various countries and economies
have different ways of measuring the overall index of consumer prices, which can
make inflation measurements hard to compare.
The Price of a Basket of Goods
The Bureau of Labor Statistics (Central Statistical Organization (CSO) in
Myanmar), which is part of the Department of Labor, has the job of computing the
CPI. It begins by collecting the prices of thousands of goods and services. The CPI
turns the prices of many goods and services into a single index measuring the overall
level of prices. Economists could simply compute an average of all prices. Yet this
approach would treat all goods and services equally. Because people buy more
chicken than caviar, the price of chicken should have a greater weight in the CPI than
the prices of caviar. The Bureau of Labor Statistics weights different items by
computing the price of basket of goods and services purchased by a typical consumer.
The CPI is the current price of the basket of goods and services relative to the price of

47
the same basket in some base year. (The base is year 2002.) For example, suppose
that the typical consumer buys 5 apples and 2 oranges every month. Then the basket
of goods consists of 5 apples and 2 oranges, and the CPI is
(5 × Current Price of Apples) + (2 × Current Price of Oranges)
CPI =. -------------------------------------------------------------------- *100
(5 × 2002 Price of Apples) + (2 × 2002 Price of Oranges)
In this CPI, 2002 is the base year. The index tells us how much it costs now to
buy 5 apples and 2 oranges relative to how much it cost to buy the same basket of
fruit in 2002.
In general,
Cost of a market basket of products at current prices
CPI = ------------------------------------------------------------------ *100
Cost of the same basket of products at base year prices
The Producer Price index (PPI)
The Producer Price index (PPI) is an index of price that measures average
change in selling prices received by domestic producers of goods and services
overtime. This index includes many goods that most consumers do not purchase. It
measures price change from the perspective of the sellers, which may differ from the
purchaser's price because of subsidies, taxes and distribution costs. We can also
construct price indexes for producers‘ input and output prices. Producer input prices
measure the cost of the inputs that producers require for production. Industrialized
nations import many of these raw materials, so that fluctuations in exchange rates will
affect changes in producer input prices. Producer output prices, or ―factory gate
prices,‖ reflect the price at which producers sell their output to distributors or
retailers. Factory gate prices exclude consumer taxes and reflect both producer input
prices and wage and productivity terms.
Governments and central banks pay attention to producer prices because they
can help predict future changes in consumer prices. Consider an increase in oil prices
that increases producer input price inflation. Because the prices of commodities such
as oil are volatile, the firm may not immediately change its factory gate prices-
customers dislike frequent changes of prices. Instead, firms will monitor oil prices,

48
and if they remain high for several months, eventually output prices will increase.
This may not immediately result in higher consumer price inflation. Instead, retailers
may decide to absorb cost rises and accept a period of low profit margins- they may
think that the increase in output prices is only temporary or intense retail competition
may mean they are unable to raise their own prices. However, if output prices
continue to increase eventually retail price will follow.
The GDP Deflator
The Gross Domestic Product (GDP) deflator is another common measure of
prices and inflation. Changes in nominal GDP reflect changes in both output and
inflation, whereas changes in real GDP only reflect changes in output. Therefore, we
can use the gap between nominal and real GDP to measure inflation.
From nominal GDP and real GDP we can compute a third statistic: the GDP
deflator. The GDP deflator, also called the implicit price deflator for GDP, is defined
as the ratio of nominal GDP to real GDP:
Nominal GDP
GDP Deflator =. ----------------------------
Real GDP
The GDP deflator reflects what‘s happening to the overall level of prices in
the economy. To better understand this, consider again an economy with only one
good, bread. If P is the price of bread and Q is het quantity sold and then nominal
GDP is the total number of dollars spent on bread in that year, P.Q. Real GDP is the
number of loaves of bread produced in that year times the prices of bread in some
base year, Pbase. Q. The GDP deflator is the price of bread in that year relative to the
price of bread in the base year, P/Pbase. The definition of the GDP deflator allows us to
separate nominal GDP into two parts: one part measures quantities (real GDP) and the
other measures prices (the GDP deflator). That is,
Nominal GDP = Real GDP × GDP Deflator.
Nominal GDP measures the current dollar value of the output of the economy.
Real GDP measures output valued at constant prices. The GDP deflator measures the
price of output relative to its price in the base year.
We can also write this equation as

49
Nominal GDP
Real GDP =. --------------------
GDP Deflator
In this form, you can see how the deflator earns its name: it is used to deflate (that is
take inflation out of) nominal GDP to yield real GDP. Because it is based on GDP,
this measure of inflation only includes domestically produced output and does not
reflect import prices. Further, because GDP is based on the concept of value added, it
does not include the impact of taxes on inflation.
7.3 The CPI versus the GDP Deflator
Earlier in this chapter we saw another measure of prices—the implicit price
deflator for GDP, which is the ratio of nominal GDP to real GDP. The GDP deflator
and the CPI give somewhat different information about what‘s happening to the
overall level of prices in the economy. There are three key differences between the
two measures. The first difference is that the GDP deflator measures the prices of all
goods and services produced, whereas the CPI measures the prices of only the goods
and services bought by consumers. Thus, an increase in the price of goods bought by
firms or the government will show up in the GDP deflator but not in the CPI.
The second difference is that the GDP deflator includes only those goods
produced domestically. Imported goods are not part of GDP and do not show up in the
GDP deflator. Hence, an increase in the price of a Toyota made in Japan and sold in
this country affects the CPI, because the Toyota is bought by consumers, but it does
not affect the GDP deflator. The third difference results from the way the two
measures aggregate prices in the economy. The CPI assigns fixed weights to the
prices of different goods, whereas the GDP deflator assigns changing weights. In
other words, the CPI is computed using a fixed basket of goods, whereas the GDP
deflator allows the basket of goods to change over time as the composition of GDP
changes.
Each of these different inflation measures reflects different commodities, so
on a year-to-year basis, they can behave differently from each other. However, the
various prices tend to move in a similar manner over long periods. The choice of
index and method of calculation used to measure inflation can create significant

50
differences in the measured inflation among economies, although most commonly
used methods reveal similar trends.
7.4 Costs of Inflation & Effects of Inflation on the Economy
The First problem is that most tax systems are specified in nominal, not real,
amounts. For instance, most countries do not tax income below a certain threshold.
But as inflation increases, so do wages and income, and more people earn above the
threshold and have to pay tax. Wages are only increasing in line with inflation; real
incomes are not changing. But the increase in nominal income means that more
people are paying tax, which actually makes them worse off.
Inflation also exerts a cost by reducing the value of cash. Unlike bank
deposits, notes and coins do not earn interest, so there is no compensation for
inflation. As a result, the value of notes and coins falls as inflation increases. This is
called the inflation tax.
As inflation increases, firms and individuals will hold less cash at any one
time, so they will need to make more trips to the bank to withdraw cash, and spend
more time keeping their cash balances at low levels. We call these costs “shoe leather
costs.” Taken literally, this phrase refers to the wear and tear that repeated trips to the
bank to withdraw funds exact on people‘s shoes. But it also captures a more general
tendency to spend time managing finances (when inflation is 20% per month, unpaid
invoices become urgent) rather than engaging in productive activity. Despite the
trivial sounding name, these costs can be substantial – shoe leather costs can exceed
0.3% of GDP when inflation is 5%.
Another cost of inflation is menu costs. Changing prices is costly for firms.
One obvious cost is physically changing prices—printing new menus or catalogs,
replacing price labels and advertisements in stores and the media. The higher inflation
is, the more often these prices have to change and the greater the cost to firms.
Moreover, marketing departments and managers have to meet regularly to review
prices, which is also costly. The lower is inflation the less often these meetings need
to be held.
Effects of Inflation on the Economy
1. Inflation can capriciously redistribute income. When it increases
unexpectedly, real wages decline and employers gain at the expense of workers while
debtors gain at the expense of creditors.

51
2. Inflation can impair incentives to save and invest by reducing the real interest
rate and increasing uncertainty. When anticipated real interest rates are negative,
financial markets can collapse.
3. Inflation distorts buying and selling decisions as people make choices not only
on the benefits and costs of alternative but also on their estimates of future inflation.
4. As inflation becomes anticipated, nominal wages will rise and possibly feed a
wage-price spiral.
5. Anticipated inflation can put upward pressure on interest rates as creditors
seek to protect themselves from the effects of inflation on their incomes.
6. Excessive inflation can lead to a recession as central banks cut on credit to
control inflation.
Summary
1. Inflation is a continual rise in the price level. The price level is an index of all
prices in the economy.
2. The price level is an indication of how high or low prices are on average in a
given year compared to prices on average in a certain base period. The price level is
measured by a price index whose value is set at 100 for a base period.
3. Deflation is a decrease in the overall price level. Prolonged periods of
deflation can be just as damaging for the economy as sustained inflation.
4. Hyperinflation is a period of very rapid increases in the overall price level.
Hyperinflations are rare, but have been used to study the costs and consequences of
even moderate inflation.
5. Since inflation is a sustained rise in the general price level, the general price
level at a given time was get by creating a price index, a number that summarizes
what happens to a weighted composite of prices of a selection of goods over time.
Price indexes measure the cost of purchasing a bundle of commodities.
6. Consumer Price Index (CPI) which measure the cost to the consumer of
purchasing a representative basket of commodities. This basket includes both goods
and services; commodities purchased in shops, through mail order or the Internet,
and commodities produced either domestically or from abroad.
7. Consumer prices also include any consumption taxes (e.g., general sales tax or
goods and services tax (GST) or value added tax (VAT)). The CPI is the most
important inflation measure because central banks often use it as policy target.

52
Various countries and economies have different ways of measuring the overall index
of consumer prices, which can make inflation measurements hard to compare.
8. Producer input prices measure the cost of the inputs that producers require for
production. Industrialized nations import many of these raw materials, so that
fluctuations in exchange rates will affect changes in producer input prices. Producer
output prices, or ―factory gate prices,‖ reflect the price at which producers sell their
output to distributors or retailers. Factory gate prices exclude consumer taxes and
reflect both producer input prices and wage and productivity terms.
9. The Producer Price index (PPI) is an index of price that measures average
change in selling prices received by domestic producers of goods and services
overtime. This index includes many goods that most consumers do not purchase. It
measures price change from the perspective of the sellers, which may differ from the
purchaser's price because of subsidies, taxes and distribution costs
Key Terms
Inflation General Price level
Deflation Hyperinflation
Price index Consumer price index
Current price Constant price
Producer price index GDP deflator
Nominal GDP Real GDP
1. Explain the different measures of the price level.
2. Suppose that the typical consumer buys 5 apples and 2 oranges every month.
Then the basket of goods consists of 5 apples and 2 oranges. The current price of
orange is 250 kyats. Using data, calculate the consumer price index.
3. Discuss the CPI versus the GDP deflator.
4. Discuss the cost of inflation.
5. Write short notes on the following
a. The GDP deflator
b. Effect of inflation on the economy

Unit 1
Introduction to Macroeconomics
(rufc&dkabm*aA' bmom&yfudk pwifavhvmjcif;)
1.1 What is Macroeconomics? (rufc&dkabm*aA' t"dyÜg,f)
Economics has two components: microeconomics and macroeconomics.
Microeconomics essentially examines how individual units, whether they be
desirable.
a. Macroeconomics studies the economy as a whole; it looks at the aggregate
economy.
b. Macroeconomics is about aggregate variables such as the overall levels of output,
consumption, employment, and prices—and how they move over time and between
countries.
c. Macroeconomics focuses on the policies that effect consumption and investment,
the foreign exchange and the trade balance, the determinants of changes in wages and
prices, monetary and fiscal policies, the money supply, budget, interest rates, and the
national debt.
d. In brief macroeconomics deals with the major economic issues and problems of
the day.
e. Macroeconomics is an important subject because a nation can affect its economic
performance.
f. Macroeconomics relies on the aggregation of microeconomic information. As soon
as units are aggregated into groups, firms into industries, households into consumers,
and so on, the movement in away from microeconomics to macroeconomics.
g. Macroeconomics is not directly concerned with the consumption behaviour of any
one household or the investment behaviour of any one firm but with total
consumption and total investment.
h. Macroeconomics involves choice among alternative central objection. These
choices are spurning those that must be facet by macroeconomic policy makers in
every nation.
i. Macroeconomics is concerned with the behaviour of the economy as a whole with
booms and recession, the economy’s total output of goods and services and the

growth of output, the rates of inflation and unemployment, the balance of payments
and the exchange rates.
j. Macroeconomics also deals with the shot- run fluctuations and business cycle.
Economics pD;yGm;a&;ynm bmom&yfukd 2 ykdif;cGJjcm;Ekdifw,f/ 4if;wdkYrSm
rufc&dkabm*aA' (Macroeconomics) ESifh rdkufc&dkabm*aA' (Microeconomics)
wdkYjzpfygw,f/rdkufc&dkabm*aA' (Microeconomics) bmom&yfonf vlwpfOD;
wpfa,mufcsif;pD&JU pm;okH;rI jzefYjzL;rI? o,HZmwcGJa0rIwkdYESifh oufqkdif ygw,f/
rufc&dkabm*aA' (Macroeconomics) bmom&yfuawmh pD;yGm;a&; taqmuf
ttkHBuD;wpfckvkH;rSm½SdwJh pmokH;ol? pD;yGm;a&;vkyfief;rsm;eJU tpkd;&awG&JU
pD;yGm;a&;qkdif&m qkH;jzwfcsufrsm;? wkdif;jynf&JU tvkyftukdif tajctae rsm;?
vkyfcvpmESifh aps;EIef; twuftusrsm;? twkd;EIef;rsm;?
EkdifiHjcm;aiGaMu;twuftusESifh jynfyukefoG,frI tajctae rsm;ESifh EkdifiHvkH;qkdif&m
aiGaMu;ESifh b@ma&; rl0g'awGeJU oufqkdifygw,f/ odkYaomf rufc&dkabm*aA'
(Macroeconomics) bmom&yf[m pmokH;olrsm;? tdrfaxmifpkrsm;
wpfOD;csif;pm;oHk;rI? &if;ESD;jrSKyfESHrIwdkYESifh wdkuf&dkuf ywfouf rIr&SdbJ pkaygif;pm;oHk;rI?
pkaygif;&if;ESD;jrSKyfESHrIwdkYESifhom oufqdkif ygw,f/
xdkUjyif rufc&dkabm*aA' bmom&yf[m umvwdktwuftusrsm; (Short-run
Fluctuations) ESifh pD;yGm;a&;oHo&m (Business Cycle) wdkYESifhvnf; oufqdkif
ygw,f/xdkYaMumifh rufc&dkabm*aA' bmom&yf[m wkdif;jynf&JU pD;yGm;a&; qkdif&m
jyoemawG ajz½Sif;csufawG pD;yGm;a&;twuftusawGeJU t"du oufqkdifaevkdY
ta&;ygaombmom&yf wpfckjzpfygw,f/
1.2 The Difference between Macro and Microeconomics
(rufc&dk ESifh rdkufc&dk abm*aA'bmom&yfrsm; uGJjym;jcm;em;csufrsm;)
Macroeconomics is different from microeconomics, which deals with the
study of individual firms, people or markets.
In microeconomics the focus is on a small group of agents, say a group of
consumers or two firms battling over a particular market. In this case, economists pay
a great deal of attention to the behaviours of the agents the model is focusing on.

Eco 2nd year Law, 2nd semester for 1st year

Eco 2nd year Law, 2nd semester for 1st year

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to Eco 2nd year Law, 2nd semester for 1st year

Similar to Eco 2nd year Law, 2nd semester for 1st year (20)

More from Nay Aung

More from Nay Aung (20)

Recently uploaded

Recently uploaded (20)

Eco 2nd year Law, 2nd semester for 1st year