Macroeconomics introduction

Introduction to Macroeconomics Macroeconomics is the branch of economics studying the behavior of the aggregate economy — at the regional, national or international level. If you are trying to gain a better appreciation of the macroeconomics problems of the Indian economy that get covered in newspapers and TV channels, this post should help you get the basic principles of macroeconomics. The aim of studying macroeconomics is to understand how an economy works, and identifying the levers that can be pulled to put the overall economy on the right path of growth.

Macroeconomics introduction

Overview of Economics A study of economics usually begins by dividing the subject into microeconomics and macroeconomics. The former focuses on the exchanges between consumers and firms in markets for goods and services. In contrast, the latter focuses on exchanges that occur across all markets within a country, taking into account the interrelated actions of consumers, businesses, government agencies, financial intermediaries, and global trading partners as they exchange resources, goods, and services as well as facilitate currency and quantity flows.

Furthermore, microeconomics concerns itself narrowly with the profit maximization goal, and macroeconomics addresses what should be done to achieve a greater, broader set of goals. Moreover, a feature common to a successful study of economics is your ability to distinguish changes that occur moving along a Macroeconomics introduction versus those that occur shifting a curve outward or inward.

Macroeconomics introduction

Completing this unit should take you approximately 17 hours. Goals, Measures, and Challenges A major Macroeconomics introduction point of macroeconomics is the total output generated within an economy.

What is macroeconomics?

The latter version removes the effect of inflation, which increases its importance as a useful measure because total output might be increasing in terms of current dollars but not in constant dollars.

Economic growth, which is the increase in real GDP over time, is one of three major goals. The other two goals are full employment and price level stability.

Fiscal and monetary policies, which are introduced in Unit 5, are formed, implemented, and evaluated against those three goals.

You will likely find that macroeconomics focuses on what should be done to achieve those goals as opposed to what is done. Accordingly, this unit and those that follow will uncover scenarios and philosophical debates about the role of government in a market-based economy and whether the GDP is an accurate measure of societal well-being, quality of life, and the standard of living.

Unemployment and Inflation Most individuals probably understand the economic concepts of unemployment and inflation.

Unemployment reflects the number of people out of work who are actively seeking work, and inflation indicates an overall rise in the price level of most, but not all, goods and services. This unit will give you a deeper look at these concepts, as well as their interrelationship. Consider first that inflation erodes the purchasing power of the dollar - or any other monetary unit, like the euro, yen, or pound.

Second, consider some details about unemployment. There is the labor force, which includes both the employed and unemployed, or those able and willing to work but not currently working, and those not in the labor force, including full time students, nonworking spouses, and retirees. Third, adding another layer of evolving depth, this unit defines and describes three types of unemployment: To better understand the interrelationship between unemployment and inflation consider the following unlikely event.

Suppose everyone who was seeking a job got one tomorrow, began earning income, and spent their income. As it would take longer for the products to arrive in retail stores, there would be a lot of money chasing a few goods.

Macroeconomics introduction

Consequently, unemployment would fall and the overall price level would rise. Gaining further depth in the progression of this course, the differences between our expectations for inflation and our observations of it tend to reinforce the notion that expectations play a large role in macroeconomics.

Completing this unit should take you approximately 20 hours. Aggregate Economic Activities and Fluctuations In studying macroeconomics, the focal point is the whole economy versus markets for goods and services. This approach entails looking at the forces affecting growth, inflation, and unemployment at the aggregate level whether it is output, income, or the set of components within GDP.

Aggregate demand is the total amount of goods and services people want to buy; in other words, it measures what people wish to purchase rather than what is actually produced.

The aggregate demand is the sum of consumption, investment, government expenses, and net exports. Aggregate supply is the total output an economy produces at a given price level.

Principles of Macroeconomics – A Basic Explanation of Key Principles

As you learned in microeconomics, firms achieve equilibrium when they produce the quantity of goods and services consumers want to buy - that is, when aggregate supply equals aggregate demand. This unit will examine shifts in aggregate supply and aggregate demand and their short-term and long-term effects for the whole economy.

Completing this unit should take you approximately 27 hours. Fiscal Policy Using various policies and tools, a government attempts to steer the macroeconomy toward three main goals: The remaining units in the course will cover conflicts and complexities in relation to those policies and tools.

This unit will focus on fiscal policy, which consists of taxing and spending, usually done through acts involving Congress or comparable legislative bodies. Completing this unit should take you approximately 12 hours.

Monetary Policy and Various Complexities behind Macroeconomic Policies Fiscal policy and monetary policy are the two main tools by which government attempts to steer the macroeconomy toward the three main goals and economic growth.

Monetary policy consists of methods through which the Federal Reserve attempts to engage banks, businesses, and individuals in effecting changes to interest rates, the supply of money, the demand for money, and so forth. Money serves as a medium of exchange, a store of value, and a unit of account.

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Those three functions enable individuals to avoid bartering. The ways in which we define and measure money are important to managing an economy.

Savings and investment are key elements within the circular flow model and are a function of interest rates.Jan 07,  · Macroeconomics Unit 1 Intro: Basic Economic Concepts (AP Macro) A quick overview of what you will cover in the first unit of Macroeconomics.

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Introduction to economics (video) | Scarcity | Khan Academy