Macroeconomics

The study of an economy in its largest sense. That is, macroeconomics studies gross domestic
product, unemployment, inflation, and similar matters. It does not look at the function of
individual companies and only tangentially studies individual industries. It is useful in
helping determine the aggregate effect of certain policies on an economy as a whole. See
also: Microeconomics.

Farlex Financial Dictionary. © 2009 Farlex, Inc. All Rights Reserved

Macroeconomics

What Does Macroeconomics Mean?

The field of economics that studies the behavior of the aggregate economy. Macroeconomics
examines economywide phenomena such as changes in unemployment, national income, rate
of growth, gross domestic product, inflation, and price levels.

Investopedia explains Macroeconomics

Macroeconomics is focused on the overall movements and trends in the economy, whereas its
counterpart—microeconomics—focuses on factors that affect the decisions made by firms
and individuals. Macro and micro factors often influence each other; for example, the current
level of unemployment in the economy as a whole will affect the supply of available workers
from which a company can select.

What Is It?
Macroeconomics is the study of the behavior of the economy as a whole. This is different
from microeconomics, which concentrates more on individuals and how they make economic
decisions. Needless to say, macroeconomy is very complicated and there are many factors
that influence it. These factors are analyzed with various economic indicators that tell us
about the overall health of the economy.

Macroeconomists try to forecast economic conditions to help consumers, firms and

governments make better decisions.

 Consumers want to know how easy it will be to find work, how much it will cost to
buy goods and services in the market, or how much it may cost to borrow money.
 Businesses use macroeconomic analysis to determine whether expanding production
will be welcomed by the market. Will consumers have enough money to buy the
products, or will the products sit on shelves and collect dust?
 Governments turn to the macroeconomy when budgeting spending, creating taxes,
deciding on interest rates and making policy decisions.

Macroeconomic analysis broadly focuses on three things: national output (measured by gross

domestic product (GDP)), unemployment and inflation. (For background reading, see The
Importance Of Inflation And GDP.)

National Output: GDP

Output, the most important concept of macroeconomics, refers to the total amount of goods
and services a country produces, commonly known as the gross domestic product. The figure
is like a snapshot of the economy at a certain point in time.

When referring to GDP, macroeconomists tend to use real GDP, which takes inflation into
account, as opposed to nominal GDP, which reflects only changes in prices. The nominal
GDP figure will be higher if inflation goes up from year to year, so it is not necessarily
indicative of higher output levels, only of higher prices.

The one drawback of the GDP is that because the information has to be collected after a
specified time period has finished, a figure for the GDP today would have to be an estimate.
GDP is nonetheless like a stepping stone into macroeconomic analysis. Once a series of
figures is collected over a period of time, they can be compared, and economists and
investors can begin to decipher the business cycles, which are made up of the alternating
periods between economic recessions (slumps) and expansions (booms) that have occurred
over time.

From there we can begin to look at the reasons why the cycles took place, which could be
government policy, consumer behavior or international phenomena, among other things. Of
course, these figures can be compared across economies as well. Hence, we can determine
which foreign countries are economically strong or weak.

Based on what they learn from the past, analysts can then begin to forecast the future state of
the economy. It is important to remember that what determines human behavior and
ultimately the economy can never be forecasted completely.

Unemployment
The unemployment rate tells macroeconomists how many people from the available pool of
labor (the labor force) are unable to find work. (For more about employment, see Surveying
The Employment Report.)

Macroeconomists have come to agree that when the economy has witnessed growth from
period to period, which is indicated in the GDP growth rate, unemployment levels tend to be
low. This is because with rising (real) GDP levels, we know that output is higher, and, hence,
more laborers are needed to keep up with the greater levels of production.

Inflation
The third main factor that macroeconomists look at is the inflation rate, or the rate at which
prices rise. Inflation is primarily measured in two ways: through the Consumer Price Index
(CPI) and the GDP deflator. The CPI gives the current price of a selected basket of goods and
services that is updated periodically. The GDP deflator is the ratio of nominal GDP to real
GDP. (For more on this, see The Consumer Price Index: A Friend To Investors and The
Consumer Price Index Controversy.)

If nominal GDP is higher than real GDP, we can assume that the prices of goods and services
has been rising. Both the CPI and GDP deflator tend to move in the same direction and differ
by less than 1%. (If you'd like to learn more about inflation, check out All About Inflation.)

Demand and Disposable Income

What ultimately determines output is demand. Demand comes from consumers (for
investment or savings - residential and business related), from the government (spending on
goods and services of federal employees) and from imports and exports.

Demand alone, however, will not determine how much is produced. What consumers demand
is not necessarily what they can afford to buy, so in order to determine demand, a consumer's
disposable income must also be measured. This is the amount of money after taxes left for
spending and/or investment.

In order to calculate disposable income, a worker's wages must be quantified as well. Salary
is a function of two main components: the minimum salary for which employees will work
and the amount employers are willing to pay in order to keep the worker in employment.
Given that the demand and supply go hand in hand, the salary level will suffer in times of
high unemployment, and it will prosper when unemployment levels are low.

Demand inherently will determine supply (production levels) and an equilibrium will be
reached; however, in order to feed demand and supply, money is needed. The central bank
(the Federal Reserve in the U.S.) prints all money that is in circulation in the economy. The
sum of all individual demand determines how much money is needed in the economy. To
determine this, economists look at the nominal GDP, which measures the aggregate level of
transactions, to determine a suitable level of money supply.

Greasing the Engine of the Economy - What the Government Can Do

Monetary Policy
A simple example of monetary policy is the central bank's open-market operations. (For more
detail, see the Federal Reserve Tutorial.) When there is a need to increase cash in the
economy, the central bank will buy government bonds (monetary expansion). These
securities allow the central bank to inject the economy with an immediate supply of cash. In
turn, interest rates, the cost to borrow money, will be reduced because the demand for the
bonds will increase their price and push the interest rate down. In theory, more people and
businesses will then buy and invest. Demand for goods and services will rise and, as a result,
output will increase. In order to cope with increased levels of production, unemployment
levels should fall and wages should rise.

On the other hand, when the central bank needs to absorb extra money in the economy, and
push inflation levels down, it will sell its T-bills. This will result in higher interest rates (less
borrowing, less spending and investment) and less demand, which will ultimately push down
price level (inflation) but will also result in less real output.

Fiscal Policy
The government can also increase taxes or lower government spending in order to conduct
a fiscal contraction. What this will do is lower real output because less government spending
means less disposable income for consumers. And, because more of consumers' wages will
go to taxes, demand as well as output will decrease.

A fiscal expansion by the government would mean that taxes are decreased or government
spending is increased. Ether way, the result will be growth in real output because the
government will stir demand with increased spending. In the meantime, a consumer with
more disposable income will be willing to buy more.
A government will tend to use a combination of both monetary and fiscal options when
setting policies that deal with the macroeconomy.
Conclusion
The performance of the economy is important to all of us. We analyze the macroeconomy by
primarily looking at national output, unemployment and inflation. Although it is consumers
who ultimately determine the direction of the economy, governments also influence it
through fiscal and monetary policy.

kya kar raha hai

6:30pmGaurav

bhai apni wali se baat kar rah hun

6:30pmMe

7:12pmMe

bhai ek kaam hai

zara mujhe chat par hi tu wo format likh wa de

project ka

7:24pmMe

bhai?

7:24pmGaurav

1 min

7:24pmMe

7:25pmGaurav

dekh bhai sabse pehle tera pura project times new roman font me hona chahiye

font size12

7:25pmMe

7:25pmGaurav

with 1.5 spacing

7:25pmMe

7:26pmGaurav

index batat hun kaise likhna hai

7:26pmMe

7:27pmGaurav

sabse pehleexecutive summary

list of tables

list of charts

abbreviations

fir chapter wise hain aage

7:28pmMe

ok

7:28pmGaurav

chapter1=intro

2=research design

7:28pmMe

7:28pmGaurav

3=industry profile

4=data analysis

5=findings

6=suggestions

7=conclusion

chapter khatam
7:29pmMe

7:29pmGaurav

ab appendix

appendix me anexure1 and anexure2

anexure 1 me bibliography likhni hai

2 me questionnaire

7:30pmMe

7:30pmGaurav

bibliogrpahy sun kaise likhni hai

sabse pehle books

fir journals fir magzines and last me webliography

7:30pmMe

acknowledment nahi dalna

7:31pmGaurav

book k auther ka last name pehle aaega

7:31pmMe

7:31pmGaurav

bata rah hun bhai pehle index toh likh

7:31pmMe

ok

7:31pmGaurav

aur sab kuch dictionary order me hoga

i mean last name

7:32pmMe

ok

7:32pmGaurav

front page me kya likhna hai woh notice board par lagaega

fir acknowledgement lagega

7:32pmMe

7:33pmGaurav

fir certificate from guide

college k letter head pe

fir company ka certificate xerox or scanned

7:33pmMe

7:34pmGaurav

bind karwana hai aur de dena hai lode ko

7:34pmMe

aur table of contents executive summary ke baad

7:34pmGaurav

abe table of content summary se pehle aaega

7:34pmMe

acha usne spiral binding ke liye mana kiya hai

7:35pmGaurav

tabhi to summary ka page no dikhaega usme

hard binding karwani hai bhai

7:35pmMe

usne kahan ki page no 1 intro ko dalna...executive summary or lists par page no nahi dalna

no border

7:36pmGaurav

haan no border no designing

abe chapter ka 1 page daalio jisme likha hoga sirf chapter n chapter name uska page no nahi dalna
ha