Introduction To Macroeconomics

Basic Concepts

What is Macro Economics?

• Concerned with the behavior or

• Functioning of the entire economy

• Aggregate Variables

• Analyses relationship between economic aggregates

• Basic tools used in Macroeconomic Theory- Aggregate Demand and Aggregate Supply

• Solution to Problems-Govt.Policy Decisions

Interdependence between Micro and Macroeconomics

• Post 1970s Economists-the two branches are not entirely different

• Foundations or underpinnings of macro economic theory are in microeconomics.

• Changes in the wage rate in an Industry affects the general wage rate of the economy

• Impact on the overall employment and output levels

Basic Concepts• Economic Activities- (i) Production–Production units-large and small Ownership – Private Sector and Govt. (ii) Consumption- (iii) Capital Formation – Excess of Production over

Consumption Production = Consumption + InvestmentFlow Variables-measured over a period of timeExamples- National Income variablesStock variables- measured at a particular point of

time . Example- Company’s Balance sheet, Money Supply