Presentation on

MACROECONOMIC PROBLEMS
Course Name: Managerial Economics
Course Code: FB-510
Course Teacher: Prof. Dr. Md. Rafiqul Islam

Submitted by
Mir Rifat Mahmud
ID: 51532013
MBA (Evening)

Department of Banking and Insurance

Faculty of Business Studies
University of Dhaka
 MACROECONOMIC PROBLEMS

• Macroeconomics is the branch of economics that

studies the behavior and performance of an economy as a
whole.
• There are 3 basic macroeconomic problems
Macroeconomic
Problems

Business
Unemployment Inflation
Cycle
 BUSINESS CYCLE

• Business cycle is composed of periods of good trade

with rising prices and low unemployment percentages,
followed by periods of bad trade with falling prices and
high unemployment percentages.
• Business Cycle prevails in all industries
• It is a wave-like movement in economic activity where an
expansion is followed by a depression
PHASES OF BUSINESS CYCLE

Real GDP

Peak

Peak
Recovery
Recession

Trough

Phases of a Business Cycle

 PHASES OF BUSINESS CYCLE

Phases of a Business Cycle Economic Activity

Peak Output – Maximum Level
Unemployment – Lowest Level
Recession Output – Declines
Unemployment - Increases
Trough Output – Minimum Level
Unemployment – Highest Level
Recovery Output – Increases
Unemployment - Declines
 UNEMPLOYMENT

• Unemployment is a state in which labour force

participants are available and willing to work but unable to
find jobs

Numbers of Unemployed
• Calculations of Unemployment Rate (%) = X 100%
Labour Force
 TYPES OF UNEMPLOYMENT

Frictional Cyclical Structural Seasonal

Unemployment Unemployment Unemployment Unemployment
• Occurs when • Occurs when there • Occurs due to • Occurs due to
people are in is a lack of jobs structural changes seasonal variation
between jobs or that results in the economy of in the activities of
entering or re- because of a a country particular
entering the labour downswing in a industries
force business cycle
 EFFECTS OF UNEMPLOYMENT

1. Effect on Individuals and Society

- Loss of income and self respect
- Loss of job skills
- Social and political problems
2. Effects on the Economy
 MEASURES TO CONTROL
UNEMPLOYMENT

Monetary Policy Fiscal Policy Direct Control Measures

1. Lowering the reserve 1. Increase in government 1. Job creation in various
requirements expenditures sectors in an economy
2. Lowering the discount rate 2. Decrease in taxes 2. Development of new land
3.Lowering the interest rate 3. Providing training and
technical education
4. Open market operations
 INFLATION

• Inflation can be defined as a continuous increase in the

general price level of goods and services in the economy.
• Degrees of Inflation –
- Creeping inflation
- Mild inflation
- Hyperinflation
CPI this year – CPI previous year
• Measures of Inflation: Inflation rate = X 100%
CPI previous year
 CAUSES OF INFLATION

Cause
2 reasons behind inflation

Demand Cost Push

Pull Inflation Inflation Increase in price with
Agg. Demand> Agg. Supply increase in production cost
 EFFECTS OF INFLATION

Effects of
inflation

Distribution of
Savings Productions Balance of trade
income
MEASURES TO CONTROL INFLATION

1.Open market operations

Monetary 2. Raising reserve requirement
Policy
3. Raising discount rate / interest rate

Fiscal 1. Increase in taxes

Policy 2. Decrease in government expenses

Direct 1.Price control and rationing

Control 2. Anti-hoarding campaign
Measures 3.Compulsory Savings