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 CHAPTER 10
INTRODUCTION TO
MACROECONOMICS

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 DIFFERENCE BETWEEN MICROECONOMICS
AND MACROECONOMICS

MICROECONOMICS MACROECONOMICS
Studies on individual Studies on national
income income
Analyzes demand for and Analyzes total employment
supply of labour in the economy
Deals with household and Deals with aggregate
firms decisions decisions
Studies on individual Studies overall price level
prices Analyzes aggregate
Analyzes demand and demand and aggregate
supply of goods supply

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 MACROECONOMIC GOALS

Full Employment

Economic Growth
Price Stability

FOUR
MAJOR
GOALS

Equitable Distribution of Income

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 MONETARY GROWTH
GROWTH FISCAL
FISCAL
MONETARY
POLICY POLICY
POLICY POLICY
POLICY
POLICY

Contractionary Expansionary
Expansionary Contractionary
Contractionary Expansionary
Expansionary
Contractionary

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 THE CONFLICTING MACROECNOMIC

To achieve full employment and

maintain price stability.

To achieve economic To achieve economic

growth and a equilibrium growth and maintain
in balance of payments. price stability.

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 COMPONENTS OF MACROECONOMY

Supply of Factor of Production

Payment for Factor of Production

Taxes
Taxes
GOVERNMENT
GOVERNMENT
Transfer
payment, Payments
wages
Purchase of goods and services

Payments for goods and services

Export Export

Import Import

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 AGGREGATE DEMAND AND
AGGREGATE SUPPLY

AGGREGATE SUPPLY
- Refers to the total
Overall Price Index quantity of output
supplied at alternative
AS price levels during a given
time period, ceteris
paribus.

AGGREGATE DEMAND
P*
- Refers to the total
quantity of output
demanded at alternative
AD price levels during a given
time period, ceteris
paribus.

Q* Aggregate output

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