Premium Essay

Macroeconomic Economics Case Study

Submitted By
Words 1130
Pages 5
Question 1
1.1
The three basic purposes of macroeconomic theories are:
• To explain how different items are associated in the complex real economic world. In the economic environment there are unlimited wants, but the means of getting those wants are limited due to insufficient resources to satisfy all possible uses. Therefore some resources must be given priority over others.

Example: Gold has a higher value than quartz in the economic world. Gold is scarcer than quartz, so gold is a higher priority resource than quartz.

• To predict what will happen if something were altered. The economic environment is always changing, so it can be hard to distinguish between the cause and effect on certain relationships. The theory extracts important
…show more content…
Spending on Consumer goods is called Consumption.

• Firms buy the four factors of production to make goods and services which they then sell to Households.

Firms aim to make a profit; they decide how to produce the goods. Spending on production is an investment. Investment spending is an injection into the circular flow of income.

• In the Goods Market, Households buy goods and services made by firms which provide them with income.

• In the Factor Market, Firms buy the four factors of production (Natural Resources, Human resources, capital, entrepreneurship and technology). This provides the households with income.

• Government spends money on the economy, providing goods and services such as health care and education to firms and households. This is an injection into the circular flow of income.

The Government in return levies taxes on households and firms in order to pay for the goods and services. This is a leakage from the circular flow of income.

The government is able to spend on the factor market in return for the four factors of production which allows the government to make the public goods and services available.

The government also spends on the goods market in return for goods made by the
…show more content…
The R22 million acts as an injection into the circular flow of income as the solar energy solutions company would need to hire more people to install solar panels, electricians, health and safety officers and builders to reinforce the roofs. Suppliers of the solar panels and batteries would also be able to benefit from the tender.

The employees of this tender will use 80% of their income to spend and the remaining 20% to save. Therefore the R22 million will become steady income for many people. This will allow the people working on the tender to spend some of their income and save some of it.

R17.6 Million would be used to spend on other sectors of the economy such as restaurant’s and vacations. There would be a saving of R4.4 million.

The R17.6 Million would now become someone else’s income and they too would use 80% of their salary on other sectors of the economy to spend and save the remaining 20%. They would spend R14 080 000 and save R3 520 000. This would carry on going until the money eventually runs

Similar Documents

Premium Essay

Bajaj Research

...SCHOOL MBA (International Business) Course Title: Economic Analysis Programme Name: MBA (IB)/3C MBA Course Code: MIB 106 Semester: I Classroom contact hours: 40 hours Faculty: Prof. Ajit K Pandey Prof. Kshamta Chauhan Credit Units: 04 Prof. Harendra K Pandey Self Study hours: 80 hours Course Objective This course aims to integrate various principles and concepts from different fields of economics with typical problems of managerial decision-making and policy formulation in business organizations whether in a local or global context. Understanding the application of economic principles to key management decisions will provide guidance to increase value creation within organizations, and allows a better understanding of the external business environment in which organizations operate. Learning Outcomes At the end of this course the student will be able to • − Use the theory of the firm to model business organizations • − Apply demand theory to establish the elasticity of demand • − Use demand estimation to forecast demand trends and change • − Apply production theory to manage production • − Use cost theory to establish short and long run behavior • − Describe market structures to establish market equilibrium • − Use pricing strategies to enable organizational coherence • − Use macroeconomic principles to address market failures |MODULE ...

Words: 1568 - Pages: 7

Premium Essay

Microrconomics

...Question 1: How is the Microeconomics different from macro economics? Discuss also the subject matter of Microeconomics in detail. Answer: MICROECONOMICS "Micro Economics is the study of particular firm, particular household, individual prices, wages, incomes, individual industries and particular commodities." ( K. E. Boulding) In micro economics, we study the small segments of an economy or, in other words, we take up the individual decision – making units of an economy in microeconomics e.g., we analyze the demand of a product or often individual and the equilibrium price of a product rather than discussing the aggregate demand of the economy and the general price level in a country. Similarly in microeconomics, we study the determination of price/reward of a factor of production, analysis of an individual firm or industry, the consumption pattern of a person, choice of technique and different market situations etc. Microeconomics is generally called the “Price Theory”. • Production. In this part of microeconomics we study the meaning of the production of wealth, the cost of production and how it is minimized factor of production and their relative importance in the production process, the production function, the analysis of supply etc. • Exchange. This part covers the market mechanism or the exchange of wealth through the forces of demand and supply, perfect and imperfect market at the behavior of the competitors etc. • Distribution. This part starts with the......

Words: 1180 - Pages: 5

Premium Essay

To Study the Impact of Oil Price Shocks on the Macroeconomic Performance of China

...Research Proposal on “To study the impact of oil price shocks on the macroeconomic performance of China” Table of Contents Dissertation Title 3 Introduction 3 Rationale of Study: Error! Bookmark not defined. Outline of the Research Project: Error! Bookmark not defined. Research Questions Error! Bookmark not defined. Research Aim and Objectives Error! Bookmark not defined. Significance of the study………………………………………………………………………………………………………………………..11 Research Methodology………………………………………………………………………………………………………………………….15 Research philoshophy…………………………………………………………………………16 Research Design…………………………………………………………………………………………………………………………………18 Data Collection…………………………………………………………………………………………………………………………………..22 Data Analysis…………………………………………………………………………………………………………………………………….28 literature review……………………………………………………………………………………………………………………………………36 References ……………………………………………………………………………………………………………………………………………42 Dissertation Title “To study the impact of oil price shocks on the macroeconomic performance of China” 1. Introduction Higher oil prices might affect the global economy through a variety of channels, including transfer of wealth from oil consumers to oil producers, a rise in the cost of production of goods and services, and impact on inflation, consumer confidence, and financial markets. In a pioneer work, Hamilton (1983) indicated that higher oil prices were responsible for almost all U.S recessions after World War II. Later other researchers extended Hamilton’s...

Words: 10757 - Pages: 44

Premium Essay

The Effects of Macroeconomic Evils on Property and Violent Crimes in Malaysia

... 35 - 50 THE EFFECTS OF MACROECONOMIC EVILS ON PROPERTY AND VIOLENT CRIMES IN MALAYSIA Chor Foon Tang♣ University of Malaya ABSTRACT The main objective of this study is to investigate the effects of macroeconomic evils – unemployment and inflation on different categories of crime rates – property and violent crimes in Malaysia via the multivariate Johansen-Juselius and Granger causality techniques. This study used annual data from 1970 to 2006. Johansen-Juselius cointegration tests revealed that property and violent crimes are cointegrated with unemployment and inflation. Furthermore, the empirical evidence exhibit that unemployment and inflation are the driving factors for crimes in Malaysia. Therefore, supply-side economy may be an ideal choice of policy to reduce crime rates in Malaysia. Keywords: Crime, Inflation, Unemployment, Malaysia 1. INTRODUCTION Recent deliberation on whether “Malaysia is a safe haven for travel and investment?” was frequently asked by the international tourists and foreign investors owing to the increasing trend of crime rates in Malaysia. From the visual inspection in Figure 1, both property and violent crime rates in Malaysia has increased quite significantly between 1970 and 2006. Over a decade from 1970 to 1980, both property and violent crime rates in Malaysia increased more than two folds. The property crime rate increased drastically from 25 thousand cases in 1970 to 66 thousand cases in 1980. In the similar......

Words: 6868 - Pages: 28

Premium Essay

Scope of Managerial Economics

...|VI Learning activity questions: Scope of Managerial Economics | | | | | |1. What is managerial economics all about? | | | |Managerial economics applies economic theory and methods to business and administrative decision making. Managerial economics | |prescribes rules for improving managerial decisions also helps managers recognize how economic forces affect organizations and | |describes the economic consequences of managerial behavior. It links traditional economics with the decision sciences to develop | |vital tools for managerial decision making. Managerial economics identifies ways to efficiently achieve goals. For example, suppose| |a small business seeks rapid growth to reach a size that permits efficient use of national media advertising. Managerial economics | |can be used to identify pricing and production strategies to help meet this short-run objective quickly and effectively. | | ...

Words: 916 - Pages: 4

Premium Essay

Macroeconomics Chapter 1

...Chapter 1 What is Macroeconomics? ( Chapter Outline 1. How Macroeconomics Affects Our Everyday Lives (a) The “Big Three” Concepts of Macroeconomics 2. Defining Macroeconomics (a) How Macroeconomics Differs from Microeconomics (b) Economic Theory: A Process of Simplification 3. Actual and Natural Real GDP (a) Unemployment: Actual and Natural (b) Real GDP and the Three Macro Concepts 4. Macroeconomics in the Short Run and Long Run (a) The Short Run: Business Cycles (b) Business Cycle Concepts (c) The Long Run: Economic Growth 5. Case Study: A Century of Business Cycles (a) Real GDP (b) Unemployment 6. Macroeconomics at the Extremes (a) Unemployment in the Great Depression, 1929–40 (b) The German Hyperinflation of 1922–23 (c) Fast and Slow Growth in Asia 7. Taming Business Cycles: Stabilization Policy (a) The Role of Stabilization Policy 8. The “Internationalization” of Macroeconomics IP* Box: How Does U.S. Economic Performance Rank? ( Chapter Overview Chapter 1 begins by introducing a set of three central macroeconomic concepts, called the “Big Three Concepts of Macroeconomics. They are the unemployment rate, the inflation rate, and productivity growth. Introducing the field of macroeconomics to students in this way has an important advantage. It facilitates the early introduction and definition of basic macroeconomic terminology, which gives students a chance to get used to thinking of macroeconomic issues......

Words: 2721 - Pages: 11

Premium Essay

Climate Change

...A Meta-Analysis of the Economic Impacts of Climate Change Policy in the United States Adam Rose* and Noah Dormady** This paper provides a meta-analysis of a broad set of recent studies of the economic impacts of climate change mitigation policies. It evaluates the infiuences of the impacts of causal factors, key economic assumptions and macroeconomic linkages on the outcome of these studies. A quantité regression analysis is also performed on the meta sample, to evaluate the robustness of those key factors throughout the full range of macro findings. Results of these analyses suggest that study results are strongly driven by data inputs, economic assumptions and modeling approaches. However, they are sometimes affected in counterintuitive ways. 1. INTRODUCTION The macroeconomic impacts of climate change mitigation policies are controversial among both scholars and the policy-making community. Results range from predictions of severe economic harm to significant overall economic gains. Given the unresolved nature of this debate, this paper seeks to shed light on it by evaluating a wide range of macroeconomic studies through a metaanalytic approach. Meta-analysis is a method for evaluating a cross-section of studies on a given topic, and evaluating the impacts of assumptions, input variables and modeling approaches on the overall findings of the studies. In essence, meta-analysis is a study of studies (Borenstein et al., 2009; Lipsey and Wilson 2001). The......

Words: 6531 - Pages: 27

Premium Essay

Explain Briefly How Macroeconomics Is Different from Microeconomics. How Can Macroeconomists Use Microeconomic Theory to Guide Them in Their Work, and Why Might the Wish to Do so? Please Give Examples.

...Introduction All economic problems arise from scarcity because human wants are unlimited but resources are limited. Economics the science of choice, it is talking about how individuals and societies make a choice from the scarcity. All economic choices can be summarized in three questions: What gets produced? How is it produced? Who gets what is produces? Economists define their work in micro and macro perspective. Microeconomics and Macroeconomics are the two major branches of economics. What is Microeconomics? Microeconomics is the study of how households and firms make decisions and how they interact in markets. So all these problems belong to microeconomics: how the consumer reacts when price changes; how the firms decide the output level and how they decide the production method; how should the firms charge their product prices. Microeconomics also considerate the demand and supply of individual goods and services and the equilibrium occurs when the quantity of demands are equal to the quantity of supplies. A typical example of microeconomics is a mobile phone manufacturer decides to charge what price of their new model of smart phone depends on the demand of the mobile markets. A number of factors would affect the demand of the mobile phone including the price of the product itself, the income of the consumer, the consumer’s amount of accumulated wealth, the price of other competitor’s product, the consumer’s tastes and preferences and the......

Words: 1205 - Pages: 5

Premium Essay

Brief Country Report: Zambia

...Level 4: Economics Empirical - Brief Country Report 2012 - 2013 COURSEWORK 2 (Word count 1761) To be completed by the student Student’s ID number | 00001992 | Module name | Economics | Module code | BUZE400 | Tutor | Azim Raimbaev | Individual assignment | | Group assignment | | Submission deadline | 25.03.13 | I certify that all material in this coursework which is not my own work has been acknowledged and I am fully aware of the consequences of plagiarism. Signed | For Academic Registrar use only | Outline Introduction 3 I. Analyses of Key Macroeconomic Indicators 3 1. Growth Rate 4 2. Productivity growth 5 3. Output Gap 6 4. Unemployment Rate 6 5. Inflation Rate 8 6. Trade 8 II. Interrelationships between key macroeconomic indicators 9 1. Growth and Unemployment, Okun's Law 9 2. Inflation-Unemployment Tradeoffs, the Philip curve 10 Conclusion 11 Bibliography 11 Introduction Over the years a great deal of works have been devoted to improve the economic performance of one of the sub-Saharan African country, located in the territory of Northern Rhodesia, Zambia. The country gained independence from the British in 1964, and started to operate and be counted as a separate economy. This empirical study analyses the available annual data on key macroeconomic indicators of Zambia for the period from 2000 to 2012 years, and explains the interrelation between these indicators with the help of important macroeconomic......

Words: 2244 - Pages: 9

Premium Essay

Purdue Macro Econ Syllabus (Very Helpful)

...ECON 515 MACROECONOMIC POLICY FALL 2012 Monday & Wednesday 8:00AM-9:30AM 9:50PM-11:20PM 1:10PM-2:40PM Rawls 3082 INSTRUCTOR: DR. GERALD J. LYNCH Office: Rawls 4039 Phone 494-4388 lynch@purdue.edu Secretary: Sherry Fisher 496-7227 Office Hours: Monday and Wednesday 3:00-4:00 and by appointment Introduction to the topic: As recent turmoil in the financial markets has demonstrated, macroeconomic fluctuations in the economy can create a difficult operating environment for the firm. This situation is further complicated by the fact that it is an environment over which the firm has little control. Even though the firm cannot control the environment, it can still react to economic conditions in ways that minimize its uncertainty as long as it understands the constraints it is facing. The purpose of this course is to help in an understanding of the macroeconomy. Macroeconomics is that branch of economics that seeks to understand and explain changes in output, general prices, employment, interest rates, foreign exchange rates, the balance of payments, and other related phenomena. Emphasis is given in this course to analyzing financial markets where interest rates are determined. We will spend more time than usual on the financial markets this year in response to the uncertainty in that environment today. Also, since the macroeconomic environment in this country is increasingly influenced by international conditions, the factors underlying trade and......

Words: 2711 - Pages: 11

Premium Essay

Finance

...focuses on the role of macroeconomic variables and global factors on the volatility of the stock returns in an emerging market like Pakistan. The paper uses two multivariate models, multivariate EGARCH and Vector Auto Regressive (VAR) models to investigate the effect of exchange rate, interest rate, industrial production, money supply, Morgan Stanley Capital International (MSCI) World Index and 6-months LIBOR on stock prices in Pakistan’s equity market. The estimate shows that domestic macroeconomic variables have varying degrees of importance in explaining the relationship between stock returns and volatility in Karachi Stock Exchange. The empirical results also show that the two global factors, MSCI World Index and 6-months LIBOR, variables used in this paper explain the stock returns in KSE. An important conclusion drawn from the results is that macroeconomic variables exhibit asymmetric effects on returns volatility. Overall, the results show that Pakistan’s stock market is partially integrated as shown by the significant role of both country and global factors. Field of Research: Finance 1. Introduction Studies on the link between macroeconomic variables and stock returns are broadly divided into two groups based on the level of market integration. The first strand promotes the view that markets are generally integrated and, as a result, global risk factors are more important in explaining returns volatility than country factors. Most of the studies that emphasize the......

Words: 5012 - Pages: 21

Premium Essay

Macro Management

...|CONTENTS | |THEORY COURSE: | |Title sheet [Program, Course Code - Course Name, Credit Structures, Pre-Requisite and Co-Requisite, Instructor’s Web-Link | |Address (Moodle), Name of Instructor, Division, and School] | |Official Time Table of the course | |Approved course syllabus signed by Instructor & Program chair | |Objective and Outcome Mapping | |Lesson Plan | |Assessment Scheme and Schedule | |Model Question Paper (Semester End Examination (SEE)) | |Lectures Slides, Tutorials and other Learning Resource provided (See Annexure 1) | |Assignments / Course Projects ...

Words: 7055 - Pages: 29

Premium Essay

Economics for the Global Manager

...BUS610-1005A-01 - Economics for the Global Manager 13 November 2010 Introduction In economics, there are many things which take places. They include performance, organization, activities and decision making. Economics, like many other subjects in life, can be studied at different levels. These things can be conducted at individual level, or at a common level. What we mean by individual level is they may be by individual company, firm or an entity business person. The way the different entities behave may differ due to their different demands and supply. What we mean by decision made at a common level is that it looks at the entire activities and behavior of the entire economy. This may be at national level, regional level or even global level. Difference between microeconomics and macroeconomics Economics is primarily split into two major sections, this are the macroeconomics and the microeconomics. The two are so much connected. Adjustment in one affects the other. Both of them work together in the world of economy. The macroeconomics can be considered to be the summation of microeconomics. However there exists a difference in the two. We shall be discussing on the distinction between the two in the subsequent few paragraphs. To begin with, the naming denotes that there is a difference between macro and microeconomics.’ macro’ stands for large in Greek, while 'micro’ stands for small in Greek. This is to explain that microeconomics covers......

Words: 817 - Pages: 4

Premium Essay

Venezuela vs. United States Economy

...paper analyzes the monopolistic competition model through a case study which is the toothpaste market. This industry represents a clear example of monopolistic competition, and its analysis is used to explain the key characteristics of this market as well as the two main firms that compete in this market in the United Stated. These firms are Procter and Gamble and Colgate Palmolive which represent the majority of the market share in the United States. Finally, it is found that innovation is a key factor in monopolistic competition because it represents the ability to differentiate products and attract more consumers. The main conclusion drawn from this paper is that the monopolistic competition is the most common model in the United States and the technology and innovation advances have allowed organizations to reach these types of markets and maximize profits. Venezuela vs. United States Economy Have you ever though why some countries are richer than others? Or what there is inequality among countries? All those answers are related to the economy of a country and their macroeconomic indicators. Today, macroeconomic is a crucial concept that we can see every day in the news; employment, inflation, and growth are some of those economy indicators. (1) But it is not so easy to say why a country is richer than other; or why the economy of a country with one of the highest reserve of oils does not have a good economic performance as other countries have. It does not......

Words: 976 - Pages: 4

Premium Essay

Econ/365 Supply and Demand Analysis

...Supply and Demand Simulation To identifywhich portions of the microeconomicsand macroeconomics principles are which in this simulationwe have to understand the difference between the two economical concepts first. Microeconomics is the study of the goods and services of the world and how they are affected by ways of the world. For example gas prices go up during the summer time for a reason other than oil companies wanting to make record high profits. The gas prices go up during the summer because we tend to travel more in the summer than we do during the winter. Families go on vacation more the weather is nicer nationwide, therefore the amount of outside events has increased drawing us out of the house and on the roads. Macroeconomics is the study of the economy as a whole. This concept takes into account the effect that unemployment is having on the housing market, how does the increase or decrease of taxes effect the spending habits of people, and the most recent favorite of us as Americans, how nationalized healthcare will increase or decrease the amount of small businesses in the near future. Now that we fully understand the differences between micro and macroeconomics it will make is easier for me to tell you which two concepts in the simulation were micro and which two were macro. One of the first concepts that we learn about in the simulation is the concept of supply and demand and what effect it has on the rate of rental of the apartments. Learning that we......

Words: 725 - Pages: 3