UNISA ECS2602:
MACROECONOMICS
Study Unit: 1,2
2016
By. E. Ramathuba
, Recap?
Macroeconomics – a branch of economics where we study the economy
as a whole. In Greek “macro” means large, thus under this branch we
study the behavior of society as whole not individuals. We look at global
economic magnitudes like the total production of a country, total
employment, the inflation rate etc.
Macroeconomic objectives
Economists usually distinguish five macroeconomic objectives which can
be used to judge the performance of the economy.
Economic growth
Full employment
Price stability
Balance of payments stability
Equal distribution of income
2
, BUSINESS CYCLE
The business cycle is the pattern of upswing (expansion) and downswing
(contraction) that can be discerned in economic activity over a number of years.
From the figure below:, between AB is the period of upswing and BC is a period of
downswing of the economy. The role of macroeconomic policies (fiscal and
monetary policies) is to try reducing the distance between the cycle and the long-
term trend, such that there is less fluctuation in the economy.
However it is important to understand what causes
the fluctuations of the business cycle. Several
economists argued that:
Fluctuations in the growth of economic activity are
temporary, thus could be associated with exogenous or
factors outside the market system.
Others argue that business cycle is endogenous. As the
economy grows, interest rates increase, imports
increase, foreign exchange reserves fall and so on until
the peak is reached.
Others argue that economic fluctuations are caused by
3 various structural external or institutional changes.
, UNIT1: OVERVIEW
OF SA ECONOMY
4
MACROECONOMICS
Study Unit: 1,2
2016
By. E. Ramathuba
, Recap?
Macroeconomics – a branch of economics where we study the economy
as a whole. In Greek “macro” means large, thus under this branch we
study the behavior of society as whole not individuals. We look at global
economic magnitudes like the total production of a country, total
employment, the inflation rate etc.
Macroeconomic objectives
Economists usually distinguish five macroeconomic objectives which can
be used to judge the performance of the economy.
Economic growth
Full employment
Price stability
Balance of payments stability
Equal distribution of income
2
, BUSINESS CYCLE
The business cycle is the pattern of upswing (expansion) and downswing
(contraction) that can be discerned in economic activity over a number of years.
From the figure below:, between AB is the period of upswing and BC is a period of
downswing of the economy. The role of macroeconomic policies (fiscal and
monetary policies) is to try reducing the distance between the cycle and the long-
term trend, such that there is less fluctuation in the economy.
However it is important to understand what causes
the fluctuations of the business cycle. Several
economists argued that:
Fluctuations in the growth of economic activity are
temporary, thus could be associated with exogenous or
factors outside the market system.
Others argue that business cycle is endogenous. As the
economy grows, interest rates increase, imports
increase, foreign exchange reserves fall and so on until
the peak is reached.
Others argue that economic fluctuations are caused by
3 various structural external or institutional changes.
, UNIT1: OVERVIEW
OF SA ECONOMY
4
