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    Macroeconomics is concerned with analyzing the economy as a whole, including aggregates like national income and output, unemployment, inflation, and trade balances. It studies how the overall economy allocates resources and analyzes issues like savings, investment, exchange rates, taxes and other macroeconomic factors that impact levels of employment, production and economic growth. Microeconomics analyzes individual agents and markets, while macroeconomics looks at the entire economy and the relationships between its major components.

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    Ravi Shankar
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    Macroeconomics is concerned with analyzing the economy as a whole, including aggregates like national income and output, unemployment, inflation, and trade balances. It studies how the overall economy allocates resources and analyzes issues like savings, investment, exchange rates, taxes and other macroeconomic factors that impact levels of employment, production and economic growth. Microeconomics analyzes individual agents and markets, while macroeconomics looks at the entire economy and the relationships between its major components.

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    Macroeconomics is concerned with analyzing the economy as a whole, including aggregates like national income and output, unemployment, inflation, and trade balances. It studies how the overall economy allocates resources and analyzes issues like savings, investment, exchange rates, taxes and other macroeconomic factors that impact levels of employment, production and economic growth. Microeconomics analyzes individual agents and markets, while macroeconomics looks at the entire economy and the relationships between its major components.

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    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    5 views17 pages

    1 Me

    Uploaded by

    Ravi Shankar
    Macroeconomics is concerned with analyzing the economy as a whole, including aggregates like national income and output, unemployment, inflation, and trade balances. It studies how the overall economy allocates resources and analyzes issues like savings, investment, exchange rates, taxes and other macroeconomic factors that impact levels of employment, production and economic growth. Microeconomics analyzes individual agents and markets, while macroeconomics looks at the entire economy and the relationships between its major components.

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    of 17

    MACRO ECONOMICS

    Concerned with the behavior of the


    Aggregates, the economy as a whole.
    Studies how the economy as a whole allocate
    resources.
     MACRO ECONOMICS
    Difference

     Economics

    Micro economic issues Macro economic issues

    How much will a consumer spend How much income will a country save?
    On food? What is the appropriate exchange rate
    How much leisure time will consumer Between the currencies?
    Enjoy? What will happen if taxes are raised?
    How much will a firm produce? What will the unemployment rate be?
    How much R&D will a company undertake?
    How macro economics helps?

     How the level of savings in an economy is


    determined?
     How the total level of investment is
    generated?
     How the level of unemployment evolves the
    pattern of overall imports & exports?
     What determines the level of training of the
    work force?
    Impact of Macro economics

     -huge impact on financial markets


     -demand for goods and services produced by
    a company
     -business people expects more –long run
    trends in the business world are driven by
    macro economic factors.
     Microeconomics
     It studies the effective use of scarce resources from the
    perspective of individual firms and consumers.
     Macroeconomics
     It studies how economies’ overall levels of employment,
    production, and growth are determined.
     It emphasizes four aspects of economic life:
     Unemployment
     Saving
     Trade imbalances
     Money and the price level
    Contd
     The national income accounts and the balance of
    payments accounts are essential tools for studying
    the macroeconomics of open, interdependent
    economies.
     National income accounting
     Records all the expenditures that contribute to a country’s
    income and output
     Balance of payments accounting
     Helps us keep track of both changes in a country’s
    indebtedness to foreigners and the fortunes of its export-
    and import-competing industries
    Two sector model

     1) The economy must be a closed economy.


    (2) No difference between imports and
    exports.
    (3) No savings at all that is whatever is
    produced it is distributed or consumed.
    CIRCULAR FLOW OF INCOME
     The circular flow has two aspects. They are as follows:
    Real Flow: It represents movement of factor services from
    the household to the firm and movement of goods and
    services from the firms to the households.
    Money Flow: Representing the money value of the physical
    exchange involved. Money moves from households to firms
    when the payment is made for goods and services and from
    the firms to the households when the payment for the factor
    services are made. We conclude:-
    National Product = National Dividend
     = National Expenditure
    Two sector


     Factor payments = W+I+R+P

     C+I=C+S
     Household income=Household expenditure
     Household expenditure=Value of output
     Value of output=Factor payments
     Household income=W+I+R+P
    Three sector model

     Governments affects economy in a number of


    ways
     Govt expenditure,savings
     C+I+G=C+S+T
     I+G=S+T or G-T=S-I
    Four sector model

     Adding foreign sector


     Exports and Imports
     C+I+G+Xn Xn=X-M
     C+I+G+Xn=S+T
    Concepts of National income

     GNP- total market value of final goods and


    services produced in a year in a country.
     GDP –the market value of all final goods &
    services produced in the domestic economy
    during a period of one year.
    Various concepts of National Product

    GNP=net factor income abroad+GPI+Xn+GP+CE


    GDP=GPI+Xn+GP+CE
    NDPmp=net private investment+Xn+GP+CE(less
    depreciation)
    NDPfc=W+P+I+R(less net indirect taxes).
    Contd;

     Net National product = GNP-Depreciation

     NI=NNP-Indirect taxes+Subsidies

     Personal income = NI-Corporate taxes-


    Undistributed corporate profits-Social security
    contributions+Transfer payments.
     Disposable Personal income = Personal
    income –Direct taxes paid by individuals and
    households.

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