Macro Economics

Scope & Goals

By Prof Kiran Rodrigues

Introduction

Microeconomics examines the behavior

of individual decision-making units
business firms and households.

Macroeconomics
deals
with
the
economy as a whole; it examines the
behavior of economic aggregates such as
aggregate
income,
consumption,
investment, and the overall level of prices.

Objectives of
Macroeconomics
it is to achieve....
High level of output (GDP)
Full employment
Price stability
Sustainable balance of payment
Rapid economic growth

High level of output (GDP)

The

ultimate aim of any economy is to

provide the desired goods and services. The
economy should be in a position to offer
these goods and services in ample number.

To

measure the output of any economy,

Gross Domestic Product (GDP) is the most
comprehensive estimate. GDP measures
the market value of the entire output
in a country during a particular year.

High level of output (GDP)

There are two variants in GDP- Nominal

and Real. When nominal GDP is adjusted
for inflation, it gives real GDP.

The importance of GDP can be analyzed

by the fact that any predictions regarding
the future growth or fall in the economy or
data on the past economic performances
are made in the GDP percentage.

Full employment

The effect of this macroeconomic indicator

is directly felt by the individuals. It is
imperative on any government that it
should ensure full employment to the
citizens of its country.

Unemployment
rate
shows
different
pattern in different phases of business
cycles. During depression unemployment
is high.

Price Stability
Stable

prices are the third macroeconomic

objective. Consumer price index (CPI) is the
most commonly used measure of overall price
level in an economy. CPI is the measure of
the cost of different types of goods
bought by the average customer.
Inflation denotes the rise or fall in general
price level in the economy. Inflation rates,
shows the rate of change in the price index.
When the inflation is high, the purchasing
power of the customers reduces.

Price Stability
A negative fall in the prices is known as
deflation, as witnessed during the Great
Depression of 1930s.
Hyperinflation refers to the rise in
prices by thousands of percentage
points, resulting in the collapse of the
price systems. Hyperinflation was
witnessed in Weimer Germany in the
1920s and again in Brazil in 1980s and
Russia in 1990s.

Sustainable Balance of
Payments
Globalization has resulted in increased
transactions between a country and the
rest of the world.
Balance of Payments records all these
transactions, both imports and exports.
Countries keep a close watch on their
international trade.

Sustainable Balance of
Payments
The barometer that shows the
efficiency of international trade is the
net exports. It is the difference between
the value of exports and value of
imports. Net exports are also called as
the balance of trade.
Every country desires to have a positive
balance of trade.

Economic Growth &

Economic Development
Every

country wishes to and strives for

having a constant growth in its
economy.
There are two parameters that judge
the rate of growth that an economy
achieves.
1. Increase in production possibility
curve or schedule
2. Growth in GDP and per capita income

THANK YOU