MACROECONOMICS & BUSINESS ENVIRONMENT ASSIGNMENT

ON

SUBMITTED BY:

GROUP 6 (SECTION – G)

NAME ENROLMENT NUMBER

AASHAY SANGHVI 20BSP0017

ASES PAL 20BSP0404
PRATIBHA GUPTA 20BSP1678
PRATYUSHA KUMAR NANDA 20BSP1691
SURBHI MISHRA 20BSP2572
TAKSH DHAMI 20BSP2609
YAGYA GUPTA 20BSP2841

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 TABLE OF CONTENTS
TOPIC PAGE NO

INTRODUCTION 3

CONCEPT OF AGGREGATE DEMAND 4

AND SUPPLY

AGGREGATE DEMAND 5

FACTORS AFFECTING AGGREGATE 6

DEMAND

AGGREGATE SUPPLY 7

FACTORS AFFECTING AGGREGATE 8

SUPPLY

INDIAN GOVERNMENT POLICIES 9

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 INTODUCTION
In the economy of a country, the output level of all the goods and services in the company tend
to move together. For example, if output of food grain is experiencing a growth, it is generally
accompanied by a rise in the output level of industrial goods.
The prices of different goods and services generally tend to rise or fall simultaneously. We can
also observe that the employment level in different production units also goes up or down
together.
Macroeconomics simplifies the analysis of how the country’s total production and level of
employment are related to attributes (called ‘variables’) such as prices, rate of interest, wage
rates, profits and so on.
When these attributes start changing fast, like when prices are going up (in what is called an
inflation), or employment and production levels are going down (heading for a depression), the
general directions of the movements of these variables for all the individual commodities are
usually of the same kind as are seen for the aggregates for the economy as a whole.
Adam Smith, the father of modern economics, had suggested that if the buyers and the sellers
in each market take their decisions following only their own self-interest, economists will not
need to think of the wealth and welfare of the country as a whole separately. Macroeconomic
policies are generally controlled and operated by the State itself or statutory bodies like the
RBI, Securities Exchange Board of India (SEBI), etc.
The expenditure, which raises the production capacity of a firm or an enterprise is called
investment expenditure. In the economy of a country, the output level of all the goods and
services in the company tend to move together. For example, if output of food grain is
experiencing a growth, it is generally accompanied by a rise in the output level of industrial
goods. The prices of different goods and services generally have a tendency to rise or fall
simultaneously. We can also observe that the employment level in different production units
also goes up or down together.

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 CONCEPTS OF AGGREGATE DEMAND AND
SUPPLY:
The concepts of supply and demand can be applied to the economy.

Key points:
 Aggregate supply is the total quantity of output firms will produce and sell—in other
words, the real GDP
 The upward-sloping aggregate supply curve—also known as the short run aggregate
supply curve—shows the positive relationship between price level and real GDP in the
short run.
 The aggregate supply curve slopes up because when the price level for outputs increases
while the price level of inputs remains fixed, the opportunity for additional profits
encourages more production.
 Potential GDP, or full-employment GDP, is the maximum quantity that an economy
can produce given full employment of its existing levels of labour, physical capital,
technology, and institutions.
 Aggregate demand is the amount of total spending on domestic goods and services in
an economy.
 The downward-sloping aggregate demand curve shows the relationship between the
price level for outputs and the quantity of total spending in the economy.

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 AGGREGATE DEMAND:
The deterioration in aggregate demand conditions in 2019-20, was exacerbated by contraction
(1.3 per cent) in gross fixed capital formation, and moderation in government expenditure in
H2. Although private consumption held up in sequential terms, it was slower in H2:2019-20
on a y-o-y basis (Chart III.1a and Table III.1). Overall, the drag on GDP growth in H2:2019-
20 can be decoded to unfavourable base effects, since momentum – measured by the q-o-q
seasonally adjusted annualised growth rate (SAAR) - accelerated in H2 (Chart III.1b). With
COVID-19 having taken a grievous toll in February and particularly in March, it is unlikely
that this momentum was sustained as the year closed. Accordingly, the NSO’s estimate of real
GDP growth for the year at 5.0 per cent in 2019-20, which itself was down from 6.1 per cent
in 2018-19, may be at risk.

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 FACTORS AFFECTING AGGREGATE DEMAND:
Changes in Interest Rates:
Whether interest rates are rising or falling will affect decisions made by consumers and
businesses. Lower interest rates will lower the borrowing costs for big-ticket items such as
appliances, vehicles, and homes. Also, companies will be able to borrow at lower rates, which
tends to lead to capital spending increases.
Conversely, higher interest rates increase the cost of borrowing for consumers and companies.
As a result, spending tends to decline or grow at a slower pace, depending on the extent of the
increase in rates.

Changes in Inflation Expectations:

Consumers who feel that inflation will increase, or prices will rise, tend to make purchases
now, which leads to rising aggregate demand. But if consumers believe prices will fall in the
future, aggregate demand tends to fall as well.

Currency Exchange Rate Changes:

If the value of the U.S. dollar falls (or rises), foreign goods will become more (or less
expensive). Meanwhile, goods manufactured in the U.S. will become cheaper (or more
expensive) for foreign markets. Aggregate demand will, therefore, increase (or decrease).

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 AGGREGATE SUPPLY:
Gross value added (GVA) growth at basic prices – the metric for aggregate supply – decelerated
to 4.7 per cent in H2:2019-20 from 5.1 per cent in H1 and 5.6 per cent in H2:2018-19 (Table
III.5). This deceleration can be attributed to base effects to a large extent since its momentum
measured in terms of q-o-q SAAR accelerated to 5.6 per cent in H2 from 4.2 per cent in H1
(Chart III.12a). With COVID-19 impacting the GVA in the last phase of Q4 strongly, it is
unlikely that this momentum would be maintained as the year closed.

The slowdown in y-o-y GVA growth reflected the deceleration in industrial and services
activities. On the other hand, GVA growth in agriculture and allied activities accelerated in
H2:2019-20 in comparison with both H1:2019-20 and H2:2018-19, buoyed by the late surge
in south-west monsoon rainfall and bountiful north-east monsoon precipitation. Based on the
Ministry of Agriculture & Farmers Welfare’s second advance estimates, production of all
major food grains, except urad and moong, in 2019-20 was higher than the final estimates of
the preceding year. Public administration, defence and other services (PADO) continued to
provide support to overall supply conditions (Chart 12b).

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 FACTORS AFFTECTING AGGREGATE SUPPLY:

Ultimately, short run aggregate supply is affected by the change in unit costs of production,
that is the cost of producing on unit of good or service in an economy.Productivity - the level
of labour, capital and Multifactor productivity (see the productivity section for more
information). Higher level of productivity means goods and services are being produced more
efficiently, decreasing unit costs of production, increasing aggregate supply. Labour Wage
Costs - higher wage costs mean that an economy produces less goods and services due to higher
costs of production. In Australia, our labour costs are high with a minimum wage of $17.70 per
hour (around $13 USD). Taxes and other costs - costs such as regulation and taxation costs can
place a burden on the unit costs of production, lowering the aggregate supply of an economy.
Material Prices - higher material prices and other inputs will increase the unit labour costs of
production and lower aggregate supply. Material prices can also be imported which is affected
by changes in the exchange rate.

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 INDIAN GOVERNMENT POLICIES:
Knowing all the government schemes is one thing, but the candidates must also know their
purpose. Candidates stand a better chance of scoring high marks when they go through the
purpose of each scheme given below.
1. Pradhan Mantri Jan Dhan Yojana: Pradhan Mantri Jan Dhan Yojana is a National
Mission on Financial Inclusion that provides an integrated approach to bring about a robust
financial inclusion and ultimately provide banking services to all households in the
country. With the outbreak of Covid-19 in India, the Finance Minister of India, Nirmala
Sitharaman made an announcement to provide Rs. 500 per month to every Women Jan-Dhan
Account Holders for the next three months. This announcement was made on 26th March 2020
as an initiative towards the loss caused by the outbreak.
2. Make in India: PM Narendra Modi launched the ‘Make in India’ campaign that will
facilitate investment, foster innovation, enhanced protection for intellectual property and build
best in manufacturing infrastructure.
‘Make in India’ has identified 25 sectors in manufacturing, infrastructure and service activities
and detailed information is being shared through interactive web-portal and professionally
developed brochures.
3. Swachh Bharat Mission: Swachh Bharat Mission was launched in the entire country as a
national movement. The campaign aims to achieve the vision of a ‘Clean India’ by 2nd October
2019. The Swachh Bharat Abhiyan is the most significant campaign with regards to sanitation
by the Government of India.
4. Beti Bachao Beti Padhao: The goal of this scheme is to make girls socially and financially
self-reliant through education.
5. Atal Pension Yojna: Atal Pension Yojana is a pension scheme mainly aimed at providing
a universal pension scheme for those who are a part of the unorganized sector such as maids,
gardeners, delivery boys, etc. This scheme replaced the previous Swavalamban Yojana which
wasn’t well-received by the people.
6. Digital India Mission: The Digital India programme is a flagship programme of the
Government of India with a vision to transform India into a digitally empowered society and
knowledge economy.
7. Pradhan Mantri Shram Yogi Maan-dhan: It is a voluntary and contributory pension
scheme, under which the subscriber would receive the following benefits:
 Minimum Assured Pension: Each subscriber under the PM-SYM, shall receive
minimum assured pension of Rs 3000/- per month after attaining the age of 60 years.
 Family Pension: During the receipt of a pension, if the subscriber dies, the spouse of
the beneficiary shall be entitled to receive 50% of the pension received by the
beneficiary as a family pension. Family pension is applicable only to a spouse.
 If a beneficiary has given a regular contribution and died due to any cause (before age
of 60 years), his/her spouse will be entitled to join and continue the scheme
subsequently by payment of regular contribution or exit the scheme as per provisions
of exit and withdrawal.

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8. Gold Monetisation Scheme: Gold Monetisation Scheme was launched by Government of
India in 2015, under this scheme one can deposit their gold in any form in a GMS account to
earn interest as the price of the gold metal goes up.
9. PM CARES Fund -Prime Minister’s Citizen Assistance and Relief in Emergency
Situation Fund: Is a public charitable trust initiated by the Prime Minister Narendra Modi.
This national trust is created with the objective to meet the distressed and dreadful situation
like COVID-19 in times ahead. PM CARES was initiated on March 28, 2020, under the
chairmanship of the Indian Prime Minister with Ministry of Home Affairs, Defence Minister
and Finance Minister as the ex-officio Trustee.
10. Aarogya Setu: The Government of India took the initiative to fight the Coronavirus
pandemic. It launched a mobile application to spread the awareness of COVID_19 among the
citizens of India through an app called Aarogya Setu. The Aarogya Setu mobile app has been
developed by the National Informatics Centre (NIC) that comes under the Ministry of
Electronics and Information Technology. For detailed information, visit the link of Aarogya
Setu given above.
11. Ayushman Bharat: Launched in 2018 by Prime Minister Narendra Modi Ayushman
Bharat is a health scheme. It is the largest government-funded healthcare programme in the
world with over 50 crore beneficiaries. The Ayushman Bharath programme has two sub-
missions PM-JAY & HWCs.

 Pradhan Mantri Jan Arogya Yojana (PM-JAY), earlier known as the National Health
Protection Scheme (NHPS) will cover the financial protection for availing healthcare
services at the secondary and tertiary levels.
 Health and Wellness Centres (HWCs) aimed at improving access to cheap and quality
healthcare services at the primary level. Read about Ayushman Bharat in detail in the link
provided above.
12. UMANG – Unified Mobile Application for New-age Governance is a mobile
application launched by PM Narendra Modi to provide secured access to the citizens to
multiple government services at one platform. UMANG is a key component of the Digital India
initiative of the government that intends to make all traditional offline government services
available 24 * 7 online through a single unified app.
13. PRASAD Scheme – Pilgrimage Rejuvenation and Spirituality Augmentation
Drive. The Scheme is launched under the Ministry of tourism in the year 2015. The aims of
PRASAD Scheme is the integrated development of pilgrimage destinations in a prioritised,
planned, and sustainable manner for providing complete religious tourism experience. The
focus of Pilgrimage Rejuvenation and Spirituality Augmentation Drive- PRASAD is on the
development and beautification of the identified pilgrimage destinations. Further details on
PRASAD scheme is given in the related page link given above in the article.
The path to success in the Government and bank exams is paved with difficulties but it is not
an impossible path to walk on. Practising with mock tests and brushing up daily on study
materials will lead to success.
14. Atmanirbhar Bharat Abhiyan:
The Atmanirbhar Bharat Abhiyan (meaning self-reliant India scheme) was announced in four
tranches by the Union Finance Minister Nirmala Sitharaman in May 2020.

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The economic stimulus relief package announced by the government is touted to be worth
Rs.20 Lakh crores. This includes the already announced Rs 1.70 lakh crore relief package, as
the PMGKY, for the poor to overcome difficulties caused by the coronavirus pandemic and the
lockdown imposed to check its spread.
5 Important Facts about Atmanirbhar Bharat Scheme:
The Prime Minister announced that an Atmanirbhar Bharat or a self-reliant India should stand
on the following five pillars:
 Economy
 Infrastructure
 21st-century technology-driven arrangements and system
 Demand
 Vibrant Demography
The 20-lakh crore worth package is almost 10% of the GDP of the country. The package
emphasizes on land, labour, liquidity, and laws. The package includes measures across many
sectors such as MSME, cottage industries, middle class, migrants, industry, etc.
Several reforms are announced to make India a self-reliant economy and mitigate negative
effects in the future. Some of the reforms are:
 Simple and clear laws
 Rational taxation system
 Supply chain reforms in agriculture
 Capable human resources
 Robust financial system

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