Submitted By:

Mashhood Ali Alvi

Submitted To:
Sir Shahzad Mushtaq
Section:
C
Roll No:
5107
Class:
BBA (HONS) 3​RD​ Semester
Subject:
Macroeconomics
Department OF DOMS
UNIVERSITY OF OKARA
Definition of Economics:
​Economics is a social science concerned
with the production, distribution, and consumption of goods and
services. It studies how individuals, businesses, governments,
and nations make choices about how to allocate resources.
Economics focuses on the actions of human beings, based on
assumptions that humans act with ​rational behaviour​, seeking
the most optimal level of benefit or utility. The building blocks of
economics are the studies of labour and ​trade​. Since there are
many possible applications of human labour and many different
ways to acquire resources, it is the task of economics to
determine which methods yield the best results.

Economics can generally be broken down

into ​macroeconomics​, which concentrates on the behaviour of
the economy as a whole, and ​microeconomics​, which focuses
on individual people and businesses.

Main Macroeconomics Variables:  

There are 4 main macroeconomic variables that policymakers 
should try and manage: ​Balance of Payments, Inflation, 
Economic Growth and Unemployment. 

This can be easily remembered using the following acronym: 

B:​ Balance of Payments 
I: ​Inflation 
G: ​(Economic) Growth 
E: ​Unemployment 

Balance of Payments: 
The Balance of Payments is the difference 
between the total amount of goods a country ​exports​ (sells to 
other countries) and the total amount of goods a 
country ​imports​ (buys from other countries). This can be simplified 
to ​X-M. 
If the amount of goods that a country exports ​(X)​ is ​greater 
than ​the amount of goods that a country imports ​(M)​, there is 
a ​balance of payments surplus ​because ​X>M. 
If the amount of goods that a country exports ​(X)​ is ​less than ​the 
amount of goods that a country imports ​(M)​, there is a ​balance of 
payments deficit ​because ​X. 

Inflation: 
​Inflation is the amount that the cost of goods and 
services within an economy has increased over a given time 
period (usually measured over a year). In the UK, this is measured 
using the Consumer Price Index (CPI). Inflation is damaging to an 
economy and this means that policymakers tend to try and keep 
inflation low. For example, the Bank of England aim to set inflation 
at around 2%. There are 2 types of inflation, cost-push 
inflation (which is caused by the costs of production for firms 
increasing, forcing them to put their sale prices up) 
and demand-pull inflation (which is caused by growing demand for 
goods that firms produce, allowing firms to increase prices to gain 
more profit). 

Economic Growth: 
​Economic growth is the amount that the 
level of output within an economy increases over a given time 
period (again usually measured over a year). Economic growth 
is extremely desirable as it means that, in general, the people 
within an economy are getting richer. Economic growth can be 
increased in a number of ways, such as technological improvement, 
an increase in the demand for goods and services, and an increase 
in the size of the workforce (a fall in unemployment). 

Unemployment: 
​Unemployment is the amount of people 
within an economy who are willing and able to work, but do not 
have a job. There are a number of different types of 
unemployment. Frictional unemployment (which is unemployment 
caused by the search for a new job or a transition between 
jobs), structural unemployment (caused by the decline of an 
industry, for example type-writing or coal mining), seasonal 
unemployment (caused by the time of year, for example working on 
a Christmas tree farm is undesirable during summer), and cyclical 
unemployment (which is caused by a recession – a reduction in the 
level of output within an economy). 

GRAPH OF MACROECNOMICS: