Intro to Macro

• Macroeconomics


  The study of the aggregate behaviour of the entire economy
• Macroeconomics


  • Studies the performance of the national economy and the global economy
  • Takes the overall economy's performance into account
• Macroeconomic issues

  • Business cycle / economic growth (economy trends fluctuate)
  • Aggregate standard of living (measure by average income related w price)
  • Inflation and unemployment (negative relationships)
  • Government and international trade deficits (GO spending > tax revenue)
• Business cycle


  Wave-fluctuation in aggregate economic activity, particularly with regard to national income, employment and output
• Phases of the business cycle []


  • Peak/Boom
  • Recession (decreasing)
  • Trough (the lowest)
  • Recovery (from through back to peak)
• Peak or Boom


  • Economy is at full employment where all available resources are employed
  • High level of output, trade, increasing demand and higher income
  • Also known as the prosperity period
• Recession


  • Decrease in the volume of output and trade
  • Increase in the level of unemployment
  • Reduction in aggregate income in terms of wage and profit
  • Decline in consumption and investment
  • A deep and prolonged recession is known as depression
• Trough


  • Overall level of economic activity will fall to the lowest level
  • Unemployment rates will be higher
  • Period of great suffering and hardship to society
• Recovery


  • Period of revival leading to an upturn of the economy
  • The economy's level of output and employment expands towards full employment
• Macroeconomic goals


  • Full employment
  • Price Stability
  • Economic Growth
  • Equitable distribution of Income
• Macroeconomic policies


  • Fiscal Policy
  • Monetary Policy
• Fiscal Policy

  Government policy involving government expenditure and government taxes to achieve macroeconomic objectives
• Monetary Policy


  Government policy to control money supply through the central bank to achieve macroeconomic objectives
• Components of the macroeconomy

  • Households
  • Firms
  • Government
  • Financial sectors
  • External Sectors