...UNIT I NATIONAL INCOME AND MACROECONOMICS 1 National Income National Income is defined as the sum total of all the goods and services produced in a country, in a particular period of time. Normally this period consists of one year duration, as a year is neither too short nor long a period. National product is usually used synonymous with National income. Alfred Marshall in his ‘Principle of Economics’ (1949) defines National income as “The labour and capital of a country, acting on its natural resources, produce annually a certain net aggregate of commodities, material and immaterial, including services of all kinds…..and net income due on account of foreign investments must be added in. This is the true net National income or Revenue of the country or the national dividend.” Irving Fisher defined national income as “The national dividend or income consists solely of services as received by the ultimate consumers, whether from their material or from human environments. Thus, a piano or an overcoat made for me this year is not a part of this year’s income, but an addition to capital. Only the services rendered to me during this year by these things are income.” Central Statistical Organization defines National income as “National Income is the sum of factor income earned by the normal residents of a country in the form of wages, rent, interest and profit in an accounting year.” Concepts of National Income There are different concepts of National Income, namely; GNP...
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...Name Institution Instructor Title Describe the terminology of macroeconomics including GDP, GNP, national income business cycles, monetary policy, fiscal policy, inflation and unemployment Macroeconomics is a broad sub-field of economics that establishes the behavior, outlook and structure, collective and established decision making system of an economy at large and usually involves national economies, regional and global economies with little or no involvement of the individual markets. Gross National Product is a determining tool in macroeconomics that measures a nation’s economy and status through international investments and residents working over-seas. GNP excludes any product values produced by foreign investors within the country. GNP is a great indicator in macroeconomics when assessing economic progress in comparison with Gross Domestic Income. (Clark & Montjoy, 2001) Macroeconomics uses GDP to determine the value of all market products and services produced within a given boundary usually a nation in a period of one year. At every stage of production, the value of all goods is added and the economic growth established based on the previously assessed standards. Macroeconomists explain that unemployment tends to reduce with a rising GDP rate since the output is increased and thus need for more skilled and unskilled labor force. Inflation gives an explanation on the rate at which product prices increase over time. Macroeconomists study this phenomenon...
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...of Macroeconomics by Smriti Chand Macro Economics The Nature and Scope of Macroeconomics! Introduction: The term ‘macro’ was first used in economics by Ragner Frisch in 1933. But as a methodological approach to economic problems, it originated with the Mercantilists in the 16th and 17th centuries. They were concerned with the economic system as a whole. In the 18th century, the Physiocrats adopted it in their Table Economies to show the ‘circulation of wealth’ (i.e., the net product) among the three classes represented by farmers, landowners and the sterile class. Malthus, Sismondi and Marx in the 19th century dealt with macroeconomic problems. Walras, Wicksell and Fisher were the modern contributors to the development of macroeconomic analysis before Keynes. Certain economists, like Cassel, Marshall, Pigou, Robertson, Hayek and Hawtrey, developed a theory of money and general prices in the decade following the First World War. But credit goes to Keynes who finally developed a general theory of income, output and employment in the wake of the Great Depression. Contents: Nature of Macroeconomics Difference between Microeconomics and Macroeconomics Dependence of Microeconomic Theory on Macroeconomics Dependence of Macroeconomics on Microeconomic Theory Macro Statics, Macro Dynamics and Comparative Statics Transition from Microeconomics to Macroeconomics Stock and Flow Concepts 1. Nature of Macroeconomics:________________________________________ Macroeconomics is the...
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...|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 ...
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...Define Macroeconomics? Difference between Microeconomics And Macroeconomics. Macroeconomics is the part of economics concerned with large scale of general economic factors, such as interest rate & national productivity. Simply, macroeconomics is the study of behavior of the economy as a whole. Broadly, macroeconomics is the field of economy that studies the behavior of the aggregate economy. Macroeconomics is the branch of economics that studies the entire economy. O. M. Amos Macroeconomics, which is the study of broad aggregates such as total employment & national income. Henderson & Quanat Macroeconomics deals with large scal economic activities of environment. G. Akle Macroeconomics examines economy in wide phenomena such as changes in unemployment, national income, rate of growth, gross domestic product, inflation & price level. Finally, macroeconomics is the study of broad economic activities & trends, is possibly the largest subfield in economy which consider the performance of the economy as a whole. Microeconomics | Macroeconomics | Microeconomics is the study of the individuals economy of a person, a company or a country. | Macroeconomics is the study of the economy as a whole. | Microeconomics is also known as price theory. | Macroeconomics is also known as income theory. | All kinds of requirements of an individual or a company can be identified. | All...
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...Differentiate between Microeconomics and Macroeconomics Name Institution Differentiate between Microeconomics and Macroeconomics According to (Krugman, 2005), Microeconomics involves analysis of individual economic units such as households, demand, and supply and market equilibrium. Macroeconomics, on the other hand, includes analysis of aggregate economic variables such as national income, inflation, unemployment and interest rates. My primary objective in this paper, therefore, is to differentiate between macroeconomics and microeconomics. This fact alone cannot distinguish macro and microeconomics. Nevertheless, microeconomics and macroeconomics are interdependent. While analyzing macroeconomics an economist has to ask questions which affect the standards of living of an entire country. Such issues will be related to inflation, unemployment, national income, product markets, fiscal policies, international trade, economic growth and interest rates (Mankiw, 2007). On the other hand, an economist while analyzing Microeconomics will look at individual’s purchasing power, demand, supply, income, utility level, labor markets, production, consumption and opportunity cost. Macroeconomics is concerned with the national income and the gross domestic product while Microeconomics is concerned with the impact of an increase or decrease in a single economic variable (Krugman, 2005). Microeconomics works on the principle that prices of goods and services are determined by the...
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...2. MEASURING CO-MOVEMENTS OF INCOME IN BRAZIL AND THE ROLE OF MACROECONOMICS In this paper we investigate the dynamics of income inequality among Brazilian states by applying the Bayesian Dynamic Factor Model described in (OTROK; WHITEMAN, 1998) and (KOSE; OTROK; WHITEMAN, 2003) to Gini indexes over the 1976-2014 period. Our results indicate that the common factor accounts for 48 percent of the Gini index co-movements; the richest states are more exposed. We found that macroeconomic stability is negatively correlated to the common factor, meaning that stability is inequality-decreasing. The deciles analysis suggests that inequality is related to lack of business cycles synchronization. Keywords: business cycles; bayesian analysis; income inequality...
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...9/26/2012 Lecture 1 – Introduction to Macroeconomics • Key concepts of macroeconomics Key concepts of macroeconmics • Macroeconomics is the study of the behavior of the economy as a whole. • Aggregate demand and supply What is an economy? -> Google images search: Vietnam Economy • Economy: An economy consists of the economic systems of a country, which allocate the labor, capital, and land resources for manufacturing, production, trade, distribution, and consumption of goods and services. 1 9/26/2012 • Macroeconomics: examines overal level of national income, employment, and prices of an economy. 1. National output/income: total output of an economy is Gross Domestic Product (GDP) 2. Employment: Labor force includes all employed persons and those unemployed individuals who are seeking jobs. 3. Stable prices: consumer price index (CPI), inlfation rate Why national income? • The ultimate objective of economic activity is to provide the goods and services that the population desire. e.g. shelter, foods, education, recreation • • The most comprehenshive measure of the total output in an economy is the gross domestic product (GDP). GDP is the measure of the market value of all final goods and services produced in a country during a year. Gross domestic product growth rate 12 10 8 6 4 2 0 -2 • Why some countries are rich, while others are poor? • Size of GDP? GDP growth rate? • What factors...
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...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 expectations about future income, wealth and prices. The manufacturer also concerns the cost of production of the new model smart phone to decide the price and output level in the market. These decisions include when a consumer (i.e. households)...
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...Definition of 'Macroeconomics' The term Macro has been taken from the Latin word Macros which means big. The field of economics that studies the behavior of the aggregate economy. Macroeconomics examines economy-wide phenomena such as changes in unemployment, national income, rate of growth, gross domestic product, inflation and price levels. Macroeconomics Concerns | Production | Prices | Income | Employment | NationalProduction/OutputTotal Industrial OutputGross Domestic ProductGrowth of Output | Aggregate Price LevelConsumer pricesProducer PricesRate of Inflation | National IncomeTotal wages and salariesTotal corporate profits | Employment andUnemployment in theEconomyTotal number of jobsUnemployment rate | Therefore, as is clear from the above, the following issues/subjects define the scope of Macro Economics: 1. Aggregates of national income and its determination 2. Theories of Income and Employment. 3. Theory of Money and Banking. 4. Fiscal Theory. 5. Balance of Payment. Scope and Importance of Macro Economics Macro Economics is of much theoretical and practical importance. Let us see what are the importance and the scope where macro economics are being used. 1. To Understand the working of the Economy The study of macro economics variables is requisite for considerate the operation of the financial system. Our main economic complexities are associated with the performance of total income, irredundant and the normal price scale in the...
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...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 the economy of smaller regions such as a firm, a company or even individual businesses. Macroeconomics is concerned with a larger area such as regional, national or global economy. Macroeconomics studies indicators such as inflation, GDP, unemployment, rates and price indices in order to get a comprehension on how the entire economy works. It looks into issues like national income, output,...
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...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 |Session no. |Topic |Reference |Cases/ Assignment/ Group | | | | | |Discussion/ Activity/ | | | | |...
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...Macroeconomic and Microeconomic environment Macroeconomics looks at aspects of economies as a whole instead of the individual markets, basically a study looking at the bigger picture of the economy. Offering a broader focus is probably the most important difference between microeconomics and macroeconomics. This branch of economics is one of the two most general fields, particularly looking at the structure, behaviour, decision-making and performance of national, regional and global economies. Through the study of aggregated indicators, macroeconomists understand the functioning of whole economies. By using GOP, unemployment rates and price indices an explanation can be made in regards to the relationships between national income, current unemployment levels, changes in employment, pricing levels, inflation, savings, investment, international trade and the rate of growth. Even though there is a broad field of study where macroeconomics is concerned, two areas of research are of utmost importance: * Understanding the causes and consequences of the business cycle, which include fluctuations in trade, economic activity and trade during periods of rapid economic growth and periods of decline. * Understanding the demands of a particular product, service or commodity during a long period of time in which national income increases. Macroeconomics enables large corporations and governments to analyse variables and behaviour's to find answers to questions such as...
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...Fundamentals of Macroeconomics Xxxxxx xxxxxxxxx ECO-372 March 16, 2015 Fundamentals of Macroeconomics Astrophysicists will tell you that energy cannot be destroyed, only changed. While in the process of researching the fundamentals of macroeconomics and how all the different sectors work with, for, and even against each other at times, I decided to focus on the concept of circular flow. Like energy, value can only be changed or repurposed, but it never actually disappears. A circular flow model of the macroeconomy containing three sectors (business, household, and government) and three markets (product, factor, and financial) that illustrates the continuous movement of the payments for goods and services between producers and consumers, with particular emphasis on taxes and government purchases. There are other circular-flow models, including two and four sector circular flows, but the three-sector, three-market circular flow model illustrates the key roles that the government, household, and business sectors play in the macroeconomy. It expands the circular flow model by illustrating how taxes are diverted from consumption expenditures to the government sector and then used for government purchases. It illustrates that taxes do not vanish from the economy, but are merely diverted (AmosWeb, 2015). The Three Sectors The three macroeconomic sectors represented in this model are: * Household Sector, which includes all people, using economic decision-making to satisfy...
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...Manager BUS610 AIU Abstract This paper’s objective is to discuss the differences between microeconomics and macroeconomics and examples of each. It will discuss a personal microeconomic example with the factors that contributed to the decision. It will also discuss an example of a macroeconomic phenomenon and the results of the decision. Economics for the Global Manager Microeconomics is an analysis of how individuals and firms will make themselves as successful as possible in a world of shortages and the penalty of those individual decisions for markets and the entire economy. It will study how individuals and firms make decisions and how the individual decisions will affect markets (Perloff, 2012). Macroeconomic is an analysis of the performance of the whole economic system. It can forecast the national income by studying the major economic factors that have predictable patterns or trends and the influence they have on one another. The factors used are prices, balance of payment positions, gross national product, and employment / unemployment (Macroeconomics, 2013). The difference between microeconomics and macroeconomics is clear. Microeconomics is the study of the individuals / firms markets. It looks at the allocations of resources and the prices of goods. Macroeconomics is a study of the whole economic system. It looks at gross national product and how it affects unemployment. A microeconomic phenomenon example is taking a looks at a specific company...
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