Presentation On

OF

Group-Infinity

Name of the Members Roll

•Md. Faruk Hossain 1407030•Ahmed Istiaq Murad 1407076•Konok Kumar Mondal 1407016•Koushik Chakma 1407036 •Rawful Al Amin 1407052•Md. Rafiqul Hasan Khan 1407054

TOPICS TO BE DISCUSSED • Introduction of evaluation of

macroeconomics• Objectives of the report• Basics of macroeconomics• Development of macroeconomics thought• Application of macroeconomics• Future of macroeconomics• Limitation the study• Conclusions

INTRODUCTION

• The evaluation of economics is as old as the evaluation of human civilization. Economics is the science that concerns with economies, from how societies produce goods and services, to how they consume.

• From the very early stage of human civilization, Macroeconomics has been a part of our society. It has changed its shape and size many times but without Macroeconomics a civilization cannot sustain or survive.

• Microeconomics is more focused on the choices made by individual actors in the economy (individual consumers or firms).

• Macroeconomics deals with the performance, structure and behavior of the entire economy.  With the help of Macroeconomics we can gauge the financial circumstances and take precautions that are necessary in adverse Macro economic conditions.  

Objectives of the Report 

• Broad Objective • To find out the contribution of societal and human force

behind the growth of Macroeconomics.  • Specific Objectives • To Know the Evaluation of introduction of Macroeconomics. • To Know the contributions of the scholars behind the

development of Macroeconomics thought. • To Know the applications of Macroeconomics. • To Know the future trends of Macroeconomics. • To Bring out the recommendations on the practical

utilizations of Macroeconomics in Bangladesh.

BASICS OF MACROECONOMICS• The field of economics that

studies the behavior of the aggregate economy is called Macroeconomics.

• Macroeconomics (from the Greek prefix makro- meaning "large" and economics)

• deals with the performance, structure, behavior, and decision-making of an economy as a whole, rather than individual markets.

Fields of macroeconomics 

Macroeconomists develop models that explain the relationship between such factors:

• National income, • Output, • Consumption, • Unemployment, • Inflation, • Savings, • Investment, • International trade and • International finance.

Development of Macroeconomics• The term ‘MACRO’ was first used in economics by RAGNER

FRISCH in 1933. But as a methodological approach to economic problems, it originated with the Mercantilists in the 16th and 17th centuries.

• In the 18th century, the physiocrats adopted it in their Table Economies to show the ‘circulation of wealth’ (Figure-2) among the three classes represented by farmers, landowners and the sterile class.

• MALTHUS, SISMONDI and MARX in the 19th century dealt with macroeconomic problems. WALRAS, WICKSELL and FISHER were the modern contributors to the development of macroeconomic analysis before KEYNES.

• Certain economists, like CASSEL, MARSHALL, PIGOU, ROBERTSON, HAYEK and HAWTREY, developed a theory of money and general prices.

• However, credit goes to Keynes who finally developed a general theory of income, output and employment in the wake of the Great Depression.

DEVELOPMENT OF MACROECONOMICS THOUGHT

• Ancient Economic Thought (Pre 500 AD)• Economic Thoughts in the Middle Age

(500-1500AD)• Mercantilism and international trade

(16th to 18th century)• Period of Classical Economics (1776-

1900)• Period of Neoclassical Economics (1901-

1936)

Years of Great Deprassion (1929-1936) 

• The Great Depression was a period of unprecedented decline in economic activity.

• It is generally agreed to have occurred between 1929 and 1939.

• Although parts of the economy had begun to recover by 1936, high unemployment persisted until the Second World War.

Background of Great Depression

• The 1920s witnessed an economic boom in the US (typified by Ford Motor cars, which made a car within the grasp of ordinary workers for the first time). Industrial output expanded very rapidly.

• Sales were often promoted through buying on credit. However, by early 1929, the steam had gone out of the economy and output was beginning to fall.

• The stock market had boomed to record levels. Price to earnings ratio was above historical averages.

• The US Agricultural sector had been in recession for many more years.

• The UK economy had been experiencing deflation and high unemployment mainly due to the cost of the First World War and attempting to rejoin the Gold standard at a pre-world war 1 rate.

Causes of Great Depressions1. Stock Market Crash of October

1929• During crash of September and October a

few firms posted disappointing results causing share prices to fall. On October 28th (Black Monday), the decline in prices turned into a crash has share prices fell 13%.

• Tuesday there was another collapse in prices known as 'Black Tuesday'.

2.Bank Failures In the first 10 months of 1930 alone,

744 US banks went bankrupt and savers lost their savings.

3.Global DownturnAmerica had lent substantial amounts to Europe and UK, to help rebuild after First World War. Therefore, there was a strong link between the US economy

and the rest of the world.

Different Views of the Great Depression

• Monetarists View: Monetarists highlight the importance of a fall in the money

supply in between 1929 and 1932, the Federal Reserve allowed the money supply (Measured by M2) to fall by a third.

• Austrian View: Austrian school of Economists such as HAYEK and LUDWIG VON

MISES place much of the blame on an unsustainable credit boom in the 1920s. They point to the decision to inflate the US economy to try and help the UK remain on the Gold standard at a rate which was too high.

Keynesian View:• KEYNES emphasized the importance of a

fundamental disequilibrium in real output. He saw the Great Depression as evidence that the classical models of economics were flawed.

• Classical economics assumed Real Output would automatically return to equilibrium (full employment levels); but the great depression showed this to be not true.

• Keynes said the problem was lack of aggregate demand.

• KEYNES heavily criticized the UK government's decision to try balance the budget in 1930 through higher taxes and lower benefits. He said this only worsened the situation.

• KEYNES also pointed to the paradox of thrift.

Keynesian Era (Post 1936AD)• JOHN MAYNARD KEYNES, (5 June 1883 – 21 April 1946), a

British economist whose ideas fundamentally affected the theory and practice of modern macroeconomics and the economic policies of governments.

• He built & widely considered to be one of the most influential economists of the 20th century and the founder of modern macroeconomics.

• His ideas are the basis for the school of thought known as Keynesian economics and its various offshoots.

• Modern macroeconomics can be said to have begun with Keynes and the publication of his book ‘The General Theory of Employment, Interest and Money’ in 1936.

• Keynes expanded on the concept of liquidity preferences and built a general theory of how the economy worked.

• Keynes's theory was brought together both monetary and real economic factors for the first time, explained unemployment, and suggested policy achieving economic stability.

 

APPLICATION OF MACROECONOMICS• Macroeconomics is the study of large factors that

affect a nation’s aggregate economy. Like government interaction in a free market, changes in gross domestic product, and inflation.

• Economists in this field generally look to solve questions and problems through a review of these aggregate factors.

• The applications of macroeconomics taxes, regulations, and restrictions on using certain resources or engaging in specific activities may be to determine which government policies help a free market and which do not.

APPLICATION OF MACROECONOMICS

• Studies on international economies can also help domestic economists discover which portions of a free market may or may not need regulation.

• Macroeconomics focuses on which areas provide more GDP and what other areas may be a drag on the nation’s economy. Applications for this use are typically on a quarterly basis, with the goal to track business cycles.

• Constant growth means a strong economy, peaked GDP represents a somewhat stagnant economy, and downward trends in GDP indicators can represent a business cycle decline.  

• Inflation is often another important part of microeconomics applications. Here, economists assess why consumer or wholesale prices are constantly increasing.

• national unemployment• monetary or fiscal policy• price levels and • national income.

OF MACROECONOMICS• Macroeconomics has direct impact on the process of private

investment. Private investment which typically accounts for about 75 percent of total investment has been stagnating. The country has a large domestic market owing to large population and reasonably increasing per capita income.  

• The key macroeconomic challenge facing Bangladesh is to accelerate growth of GDP substantially in order to realize the country's dream of achieving middle income status by 2021. To do so, we would require enhancing both private and government investment. The constraints to private investment starkly visible in the areas of political instability, infrastructural deficiency, poor governance and skill deficiency need to be addressed. There is also an urgent need for increasing government investment in Bangladesh.

• Raising revenue/GDP ratio including through improvement in the efficiency of state-owned enterprises remains a major concern for increasing government investment. The basket of export goods as well as markets for exports needs to be diversified.

Limitation the Study• Given limited time,• Choice of research design, • Statistical model constraints, or other

factors we faced greatly . • Practical applications of the theory could

not be proven due to the non-availability of resources.

• The people whom we managed to get to take our survey may not truly be a random sample, which is also a limitation.

CONCLUSIONS

• Given the enormous scale of government budgets and the impact of economic policy on consumers and businesses, macroeconomics clearly concerns itself with significant issues. Properly applied, economic theories can offer illuminating insights on how economies function and the long-term consequences of particular policies and decisions.  

• It is also important to understand the limitations of economic theory. Theories are often created in a vacuum and lack certain real-world details like taxation, regulation and transaction costs.

• Hence, by better understanding microeconomics and the ramifications of microeconomic decisions, investors can get at least a glimpse of the probable future and act accordingly with confidence. Even with the limits of economic theory, it is important and worthwhile to follow the major macroeconomic indicators like GDP, inflation and unemployment.