Introduction to Macroeconomics
Contents:
- Overview of Macroeconomics
- How do we measure aggregate economic activity (GDP)
- National Output concept
- Circular flow of income, output, and expenditure
- Examples of measuring GDP in three different methods
- Types of final expenditure
- Three structures of measuring GDP
What is Macroeconomics?
- It is economy as a whole. It is the aggregate phenomena
- Economy doesn’t grow steadily all the time.
- It depends on business cycles, living standards, inflation, unemployment, and
the balance of payments.
, - Macroeconomics is not just explaining what’s happening and why is it
happening but also to comment on whether the government can do anything
about it to improve the situation. Can they use monetary and/ or fiscal policy
instruments to help stabilize the economy.
- i.e. government helped out in Covid Crisis (furlough scheme etc.)
Why do we need Macroeconomics?
- To understand the economic environment, to know how the economy is doing,
it is suitable to invest or start a business etc.
- We need it for Real GDP, people have been getting better off.
- We need it to understand how the living standard has been increasing over
time.
- In an economy, there are good times and bad times in growth rate.
Economies do not move in a straight line. It fluctuates.
- Macroeconomics tries to understand and recommend policies to improve the
outcome.
- Forecasts tend to be wrong in either direction.
- Since second world war, prices have only gone up.
- GDP is increasing as an overall trend.
- Price level has been increasing, no negative inflation.
- Unemployment has fluctuation.
- Paying out to foreigners more than receiving
- Transferring more than getting transferred.
- All of this understood through the theories and models of macroeconomics.
Measure Of GDP:
GDP: Gross Domestic Product
GNI: Gross National Income (previously known as Gross National Product)
- GDP is the measure of an output of an economy within a period of time.
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Contents:
- Overview of Macroeconomics
- How do we measure aggregate economic activity (GDP)
- National Output concept
- Circular flow of income, output, and expenditure
- Examples of measuring GDP in three different methods
- Types of final expenditure
- Three structures of measuring GDP
What is Macroeconomics?
- It is economy as a whole. It is the aggregate phenomena
- Economy doesn’t grow steadily all the time.
- It depends on business cycles, living standards, inflation, unemployment, and
the balance of payments.
, - Macroeconomics is not just explaining what’s happening and why is it
happening but also to comment on whether the government can do anything
about it to improve the situation. Can they use monetary and/ or fiscal policy
instruments to help stabilize the economy.
- i.e. government helped out in Covid Crisis (furlough scheme etc.)
Why do we need Macroeconomics?
- To understand the economic environment, to know how the economy is doing,
it is suitable to invest or start a business etc.
- We need it for Real GDP, people have been getting better off.
- We need it to understand how the living standard has been increasing over
time.
- In an economy, there are good times and bad times in growth rate.
Economies do not move in a straight line. It fluctuates.
- Macroeconomics tries to understand and recommend policies to improve the
outcome.
- Forecasts tend to be wrong in either direction.
- Since second world war, prices have only gone up.
- GDP is increasing as an overall trend.
- Price level has been increasing, no negative inflation.
- Unemployment has fluctuation.
- Paying out to foreigners more than receiving
- Transferring more than getting transferred.
- All of this understood through the theories and models of macroeconomics.
Measure Of GDP:
GDP: Gross Domestic Product
GNI: Gross National Income (previously known as Gross National Product)
- GDP is the measure of an output of an economy within a period of time.
2
