Objectives of Macroeconomics
Introduction to Macroeconomics
Chapter 1
Introduction to Macroeconomics
1.1 INTRODUCTION
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Economics is divided into two main branches: microeconomics and macroeconomics.
Macro means large, and micro means small.
Microeconomics takes a close-up view of the economy by concentrating on the choices made by individual participants in the economy such as consumers, workers, business managers and investors.
Microeconomics stresses on the role of prices in business and personal decisions. One of its major goals is to understand how prices of particular goods and services are determined and how prices influence decisions. Because of this reason, microeconomics is sometimes called price theory.
Macroeconomics looks at the economy from a broader perspective by considering its overall performance.
It is the study of aggregate economic activity. Aggregate economic activity is the performance of the economy as a whole – the economy in the aggregate.
Examples are people’s incomes and living standards, unemployment; inflation – rising prices – and changes in the value of money.
Examples of Differences between Micro and Macro:
Micro
The study of smaller scope
Individual decision making units
Household income
Production of particular product
Individual prices
Attention to specific units
Macro
The stud of bigger scope
Aggregate decision
National income
National output/product
Overall general price level
Units as an Aggregate
Introduction to Macroeconomics
1.2 OBJECTIVES OF CONVENTIONAL MACROECONOMICS
They are as follows:
槨 To achieve full employment
槨 To achieve price stability
槨 To achieve economic growth
槨 To achieve equilibrium in foreign sector
槨 To achieve equitable distribution of income
(a) To Achieve Full Employment
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•
•
The more fully resources are employed, the greater the level of output of goods and services and higher standard of living.
High unemployment causes poverty. People become dissatisfied with the government and this will lead to
Chapter 1
Introduction to Macroeconomics
1.1 INTRODUCTION
•
•
•
•
•
•
•
Economics is divided into two main branches: microeconomics and macroeconomics.
Macro means large, and micro means small.
Microeconomics takes a close-up view of the economy by concentrating on the choices made by individual participants in the economy such as consumers, workers, business managers and investors.
Microeconomics stresses on the role of prices in business and personal decisions. One of its major goals is to understand how prices of particular goods and services are determined and how prices influence decisions. Because of this reason, microeconomics is sometimes called price theory.
Macroeconomics looks at the economy from a broader perspective by considering its overall performance.
It is the study of aggregate economic activity. Aggregate economic activity is the performance of the economy as a whole – the economy in the aggregate.
Examples are people’s incomes and living standards, unemployment; inflation – rising prices – and changes in the value of money.
Examples of Differences between Micro and Macro:
Micro
The study of smaller scope
Individual decision making units
Household income
Production of particular product
Individual prices
Attention to specific units
Macro
The stud of bigger scope
Aggregate decision
National income
National output/product
Overall general price level
Units as an Aggregate
Introduction to Macroeconomics
1.2 OBJECTIVES OF CONVENTIONAL MACROECONOMICS
They are as follows:
槨 To achieve full employment
槨 To achieve price stability
槨 To achieve economic growth
槨 To achieve equilibrium in foreign sector
槨 To achieve equitable distribution of income
(a) To Achieve Full Employment
•
•
•
The more fully resources are employed, the greater the level of output of goods and services and higher standard of living.
High unemployment causes poverty. People become dissatisfied with the government and this will lead to