What Is Macro-Economics? |CBCS
What Is Macro-Economics?
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Google says - "the branch of economics concerned with large-scale or general economic factors, such as interest rates and national productivity."
Wikipedia says -" Macroeconomics is a branch of economics that studies how an overall economy—the market systems that operate on a large scale—behaves. Macroeconomics studies economy-wide phenomena such as inflation, price levels, rate of economic growth, national income, gross domestic product (GDP), and changes in unemployment."
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Macroeconomics deals with economy as a whole. It focuses on the determination of total National Income, deals with aggregates such as aggregate consumption and investment, and looks at the overall level of prices instead of individual prices.
There are three major concern :
Output Growth
Unemplyment
Inflation and Deflation
Components Of Macro-Economics
Business Cycle – The cycle of short term ups and downs in economy.
Aggregate Output – Total Quantity of Goods and services produced in an economy in given period.
Recession- A period during which aggregate output declines. Conventionally, a period in which aggregate output declines for two consecutive quarters.
Depression- A prolonged and deep recession.
Expansion/Boom- The period in business cycle from trough up to peak during which output and employment grow.
Contraction/Recession/Slump- The period in business cycle from peak down to trough during which output and employment fall.
•Output Growth:
In judging whether an economy is expanding or contracting, note the difference between level of economic activity and it’s rate of change.
If economy has just left trough, it will be growing but it’s level of output will still be low.
If economy has just started to decline from peak, it will be contracting (rate of change is negative) but it’s level of output will still be high.
The business cycle is symmetrical, which means that length of expansion is the same as length of contraction. When contraction comes, it may be fast and sharp while expansion may be slow and gradual.
•Unemployment:
Unemployment rate is the percentage of labour force that is unemployed.
It is key indicator of economy’s health because unemployment rate is usually closely related to economy’s aggregate output.
We do not expect to see zero unemployment. At any time, some firms may go bankrupt due to competition from rivals, or bad luck. Employees of such firm typically are not able to find new jobs immediately and while they are looking for work, they will be unemployed.
The existence of unemployment seems to imply that the aggregate labour market is not in equilibrium – that something prevent quantity supplied and quantity demanded from equating.
•Inflation and Deflation:
Inflation refers to increase in overall price level.
Hyper-inflation refers to period of very rapid increases in overall price level. These are rare.
Deflation refers to decrease in overall price level.
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Let’s understand basic terms.
Business Cycle – The cycle of short term ups and downs in economy.
Aggregate Output – Total Quantity of Goods and services produced in an economy in given period.
Recession- A period during which aggregate output declines. Conventionally, a period in which aggregate output declines for two consecutive quarters.
Depression- A prolonged and deep recession.
Expansion/Boom- The period in business cycle from trough up to peak during which output and employment grow.
Contraction/Recession/Slump- The period in business cycle from peak down to trough during which output and employment fall.
•Output Growth:
In judging whether an economy is expanding or contracting, note the difference between level of economic activity and it’s rate of change.
If economy has just left trough, it will be growing but it’s level of output will still be low.
If economy has just started to decline from peak, it will be contracting (rate of change is negative) but it’s level of output will still be high.
The business cycle is symmetrical, which means that length of expansion is the same as length of contraction. When contraction comes, it may be fast and sharp while expansion may be slow and gradual.
•Unemployment:
Unemployment rate is the percentage of labour force that is unemployed.
It is key indicator of economy’s health because unemployment rate is usually closely related to economy’s aggregate output.
We do not expect to see zero unemployment. At any time, some firms may go bankrupt due to competition from rivals, or bad luck. Employees of such firm typically are not able to find new jobs immediately and while they are looking for work, they will be unemployed.
The existence of unemployment seems to imply that the aggregate labour market is not in equilibrium – that something prevent quantity supplied and quantity demanded from equating.
•Inflation and Deflation:
Inflation refers to increase in overall price level.
Hyper-inflation refers to period of very rapid increases in overall price level. These are rare.
Deflation refers to decrease in overall price level.
Do like, comment and share,
Don't forget to subscribe for daily updates.
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