Macroeconomics

Presented By:

Zimran Ali

Roll no: BB14047

Macroeconomics

o Macroeconomics has been derived from Greek word “MAKROS” which means “LARGE”.

o Macroeconomic is the study of large part of the economy. i.e. the whole country.

o The study of economic behavior of the economy as a whole & not the individual economic units of the economy.

Macroeconomics

Prof. Boulding:“Macroeconomics deals not only

with individual quantities but with the aggregates of these quantities, not with the individual incomes, but with national income, not with individual price, but with prices level, not with individual output, but with the national output.”

Business Cycle

• “A trade cycle is composed of good trade characterized by rising prices and low unemployment percentages, alternation with periods of bad trade characterized by falling prices and high unemployment percentages”.

Keynes

According to Joseph Business Cycle has 4 steps

Expansion: Increase in production and prices, Low interests rates.Recession: Drops in prices and in output high

interests rates.Depression: stock exchanges crash and

multiple bankruptcies of firms occur.Recovery/Revival: Stocks recover because of

the fall in prices and incomes.

Business Cycle

Causes of Business Cycle

External factorsi. Inventions and innovation:ii. Wars and political events:

Monetary policy

• Monetary policy is one of the ways that the U.S. Government attempts to control the economy. If the money supply grows too fast, the rate of inflation will increase; if the growth of the money supply is slowed too much, then economic growth may also slow.

Fiscal policy

• Fiscal policy is the means by which a government adjusts its spending levels and tac rates to monitor and influence a nation’s economy. It is the sister strategy to monetary policy through which a central bank influences a nation’s money supply.

Inflation, deflation and hyper inflation

• Inflation:inflation means a sustained increase in the

aggregate or general price level in ane economy. Inflation means there is an increase in the cost of living.

Between August 1974 and August 1978, the rate of inflation feel from 25% to 8%.

• Deflation:deflation is a fall in the price level of the

economy. It means there will be a negative inflation rate

infa

• Hyper inflation:this is generally considered to

occur when inflation is greater than 1000%. With hyper inflation money loses its value so rapidly that nobody wants to use it as a medium of exchange

In 1920s Germany had inflation of 100 billion%In 1946 Hungary had inflation of 42,000 billionper cent

Unemployment

• Unemployment occurs when a person who is actively searching for employment is unable to find work.

• In simple words we can say measure the friction of labor force that is out of work is called unemployment.