Ans. Macroeconomics considers the performance of the economy as a whole. Many macroeconomic issues appear in the press and on the evening news on a daily basis. When we study macroeconomics we are looking at topics such as economic growth; inflation; changes in employment and unemployment, our trade performance with other countries (i.e. the balance of payments) the relative success or failure of government economic policies and the decisions.
..give examples of macroeconomic variables.
Ans. examples of macroeconomic variables are
a. National income
..mention any 2 differences between macroeconomics and microeconomics. Ans.
…define an economic agent ?
Or what do you mean by a player in an economy?
Ans. a person, company, or organization that has an influence on the economy by producing, buying, or selling is called an economic agent or a player in an economy. …define durable consumer goods?
Ans. Long-lived goods bought for final consumption and whose uses are expected to be enjoyed over a period longer than (usually 1 year) used in national income accounting is called consumer durable goods. Examples of durable goods are automobiles, appliances, furniture, jewelry, consumer electronics and sporting goods. ..define non-durable or single use consumer goods.
Ans. Consumer goods which are consumed in the sense that they can only be used once or very few times and is not expected to last over an accounting year is called non-durable or single use consumer goods. Example: food, drink, tobacco.
…define intermediate goods.
Ans. A good (or service) that is used as an input or component in the production of another good. Intermediate goods are combined into the production of finished products, or what are termed final goods. Intermediate goods will be further processed before sold as final goods. Examples of intermediate goods include sugar, car engines, steel and chlorine.
…whay do you mean by capital goods?
Ans A capital good (sometimes simply capital in economics) is a durable good that is used in production of goods or services. Capital goods are acquired by a society by saving wealth which can be invested in the means of production. Example cars and furnitures which can be used for both private or business purpose. …define a final good.
Ans. A good or service that is consumed by the end user and does not require any further processing.
example; tires for automobile industry or copper which can be used to make some further goods.
..define stock and flow variables.
Ans. A stock variable is measured at one specific time, and represents a quantity existing at that point in time which may have accumulated in the past. Example – money and wealth. A flow variable is measured over an interval of time. Therefore a flow would be measured per unit of time (say a year). Flow is roughly analogous to rate or speed in this sense. Example- government deficit, government wealth.
..what is the difference between stock and flow variables?
1. A stock variable is measured at one specific time, and represents a quantity existing at that point in time which may have accumulated in the past. 2. A stock variable has no time dimension.
1. A flow variable is measured over an interval of time. Therefore a flow would be measured per unit of time (say a year). Flow is roughly analogous to rate or speed in this sense. 2. A flow variable is related to time and expreessed in terms of time period.
…define the following: a. investment, b.gross investment , c. inventory investment, d. fixed investment, e. net investment. Ans. A. Investment: the process of adding to stocks of real productive assets is called investment. For example accumulation of newly produced physical entities, such as factories, machinery, houses, and goods inventories. b.gross investment: gross investment is defined as the amount a company invests in business assets that does not account for any depreciation. The gross figure more accurately reflects the company's actual financial commitment to an asset from which it can derive a return on investment. c. inventory investment: Inventory investment is a measurement of the change in inventory levels in an economy from one time period to the next. This measurement is often a good indicator for the future direction of an economy, although it is not always accurate.
d. fixed investment: investment in fixed capital or to the replacement of depreciated fixed capital is defined as fixed investment. e. net investment.-the net increase in the amount of capital which is expressed as gross investment minus an estimate of capital consumption is defined as net investment.
…define capital loss.
Ans. The loss incurred when a capital asset (investment or real estate) decreases in value is defined as capital loss. This loss is not realized until the asset is sold for a price that is lower than the original purchase price. …what is depreciation allowance?
Ans. The sum of money which is deducted from income each year in order to fund the loss due to depreciation is called depreciation allowance.
..explain the nature and scope of macroeconomics.
Ans. Nature of macroeconomics:
Macro-economics studies the aggregates of the entire economy. The nature of macro-economics can be understood with the help of the following aspects: i) DETERMINATION OF NATIONAL INCOME AND EMPLOYMENT:
Macro-economics deals with aggregate demand and aggregate supply that determines the equilibrium level of income and employment in the economy. The level of aggregate demand determines the level of income and employment. Macroeconomics also deals with the problem of unemployment due to lack of aggregate demand. Moreover, it studies the economic fluctuations and business cycles. ii) DETERMINATION OF GENERAL PRICE LEVEL:
Macroeconomics studies the general level of price in an economy. It also studies the problem of inflation and deflation.
iii) ECONOMIC GROWTH AND DEVELOPMENT:
Macroeconomics deals with economic growth and development.
It studies various factors that contribute to economic growth and development. vi) DISTRIBUTION OF FACTORS OF PRODUCTION:
Macroeconomics also deals with various factors of production and their relative share in the total production or total national income *Scope of macroecomics:
Macroeconomics occupies a significant place in economic analysis and has a lot of theoretical and practical importance. The importance of macro-economics can be understood from the following points:
i) POLICY FORMULATION:
Macroeconomics plays a very important role in formulating economic policies. Since Government intervention in economic affairs is indispensable in the present economic scenario, the knowledge of aggregates is of great importance in the framing as well as the implementation of economic policies of the nation. ii) BASIS FOR MICROSTUDY:
Macroeconomics provides the basis for microeconomic analysis as the study of aggregates helps to understand and verify the behaviours of individual units. iii) MULTI-DIMENSIONAL STUDY:
~Macroeconomics has a very wide scope and covers multi-dimensional aspects like population, employment, income, production, distribution, consumption, inflation, etc. This is very helpful in controlling fluctuations in these factors. vi) NATIONAL INCOME:
Macroeconomics studies national income accounting which helps to understand the distribution of income among different groups of people. It is also instrumental in forecasting the level of economic activity. v) SPECIAL GROWTH MODELS:
Macroeconomics has been useful in developing special growth models. These growth models are applied for economic development because the economics of growth is, in essence, the study of macroeconomics. vi) MONETARY PROBLEMS:
Macroeconomics has special significance in studying monetary problems that adversely affect the economy. In fact, macroeconomics focuses on the problems of inflation and deflation and their solution by adopting monetary, fiscal and direct control measures.