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Introduction To Macroeconomics
At the end of this chapter, student should be able to:
define macroeconomics
distinguish between macroeconomics and
microeconomics
explain the macroeconomics goals
explain the problem of macroeconomics goals
define Aggregate Demand (AD) and Aggregate Supply
(AS)
draw AD and AS curves
Identify factors that shift AD and AS curves
Macroeconomics is a field of economics that studies the
relationship between aggregate variables such as
income, purchasing power, price and money. This
means macroeconomics examines the function of the
economy as a whole system, looking at how demand
and supply of products, services and resources are
determined and the factors that influence them. The goal
of macroeconomics is to explain the economic changes
that affect many households, firms, and markets at once.
Macroeconomics is the study of a nation’s economy. It is
interested in the aggregate demand and aggregate supply
forces of the entire economy. It deals with aggregate
economics decision or behavior of an economy as a whole;
for example, the problem of inflation, level of unemployment,
and payment of a deficit.
It studies a nation’s total output (GDP) as a whole, and the
economic forces at work. These areas include:
a) unemployment rate
b) inflation rate
c) growth of domestic products
d) foreign exchange rates
Microeconomics is the study of economics in a smaller
context in many different areas. These areas include the
study of:
a) the individual consumer (consumer behaviour)
b) an individual firm (production theory)
c) a single industry (market structures)
Microeconomics Macroeconomics
Analyzes the detailed households, firms, or Analyzes economic activities as a whole
industries behaviour or aggregate
Studies how individuals like consumers, Studies the entire society where the sum
owners of production, and business firms of sets of micro variables yields aggregate
make decisions in the market; resource (macro) variables; fir example, number of
allocation; how relative prices, outputs, and workers employed by various firms
the distribution of income are determined becomes national employment
Studies how rational consumers maximize Focuses on aggregate variables relevant
satisfaction; how suppliers maximize to an entire economy such as general
profits or minimize costs price level, consumption, investment, and
government expenditure
Major goals are efficiency and optimization Major goals are national income,
employment, unemployment rate, general
price level stability, low inflation rate,
economic growth and international trade
Which of the following is a microeconomics statement and
macroeconomics statement?