Introduction
Macroeconomics is the study of the
structure and performance of national
economies and of the government policies
used to influence economic performance.
Indicators of Structure: Consumption,
Investment, Savings, Wages, Export-Import
etc.
Indicators of Performance: GDP, GDP Growth
Rate, Unemployment Rate, Inflation Rate etc.
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MACROECONOMICS
Government Policies
Fiscal Policy - Policies related to taxes and
government expenditure.
Monetary Policy – Policies related to money
supply.
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What Macroeconomists Do?
Macroeconomic Forecasting - Prediction
about macroeconomic variables
Macroeconomic Analysis – Understanding and
working out implications of current
macroeconomic events.
Macroeconomic Research – Developing and
testing economic theories. Developing
economic models.
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Steps in Developing Theories/Models
How reasonable and realistic the
assumptions are?
Can we use the model to study real
problems?
Can its predictions be empirically tested?
Empirical validity of its predictions?
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Two Schools of Thought
The Classical Approach – Markets are
efficient and price adjustments quickly bring
about market equilibrium.
The Keynesian Approach – Price adjustments
are slow and market can remain in
disequilibrium for a long period of time.
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