lecture 1 macroeconomics

8/12/2019 Lecture 1 Macroeconomics

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Lecture 1

Introduction to MacroeconomicsDefinition and Scope of Macroeconomics

Important Macroeconomic Variables

The Goals of Macroeconomics/Main Economic Goals ofa Nation

Markets in Macroeconomics

The Development of Macroeconomics


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Learning Outcomes/Objectives

1. Define Macroeconomics

2. Identify Macroeconomic Variables

3. Identify and Explain the Main Economic Goals of a

Nation

4. Differeciate between the Two Main Traditions in

Macroeconomics (Classical & Keynesian) including

the New Classical and New Keynesian


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Preamble

Why have some countries experienced rapid growth in

incomes over the past century while others are battling with

poverty?

Why do some countries have high rates of inflation while

others maintain stable prices?

Why the high interest rate and graduate unemployment rate

in Ghana as compared to other countries?

Why should the debt crisis in Europe and other difficulties

that other countries face be a source of concern to Ghana? Do macroeconomic issues play important role in political

debate and influence voting in Ghana?

Should the government intervene to improve water,

petroleum & electricity supplies in Ghana?


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Definition and Scope of Macroeconomics

Macroeconomics is the study of the economy as a whole.Macroeconomics deals with the structure, performance

and behaviour of the economy as a whole.

It is concerned with the determination of broad aggregatesof the economy with respect to total income or output of

goods & services, employment/unemployment, inflation,

government expenditure, consumption, exchange rates and

the balance of payments. In the international scene, it is concerned with the

interaction of the domestic economy with the rest of the

world.


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Major Macroeconomic Variables

The important macroeconomic variables that

we deal with in macroeconomics are:

The general price level, employment, output,

inflation, interest rates, consumption level,

investment level etc.


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The Goals of Macroeconomics

The goals of macroeconomics are:

Full Employment

Price Stability

Balance of Payments Stability

Economic Growth


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Main Economic Goals of a Nation

The most important economic goals or objectives of a

nation are achievement of the ff:

a) Internal Balance - Price Stability

- High Level of Employment

b) External Balance - Stable Exchange Rate

- Favourable Balance of Payments

- Favourable Terms of Trade

- Balance between Exports and Importsc) A reasonable rate of economic growth (GDP growth)

d) An equitable distribution of incomeReduction of

income inequality; Increased standard of living;

Poverty Reduction


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Markets in Macroeconomics

Every economy consists of markets and each market is

controlled by the supply of and demand for the products

that are sold and purchased in the market. The markets

are:Goods & Services (Commodity/Product) market

Labour market

Money marketCapital (Bonds) market

Money, Capital/Bonds markets fall under assets market.


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A diagrammatic Representation of Markets


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The Development of MacroeconomicsThe Two Traditions in Macroeconomics

How do we explain the periods of persistent high

unemployment and inflation rates that were recorded in

various parts of the world, both past and recent times?

(1930s, 1970s, 1980s, 1990s and the past five years).

What should be the right policy direction in addressing

these economic challenges/problems?

Should there be an active government or minimalgovernment intervention in the wake of such problems?

Attempt to respond to these pertinent macroeconomic

issues have divided macroeconomists along diverging

lines of debates or arguments.


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The Development of MacroeconomicsThe Two Traditions in Macroeconomics

One school of thought believes that markets work best if

left to themselves; the other is of the view that government

intervention can significantly improve the operation of the

economy. The two main intellectual traditions in macroeconomics

are:

the Classical Macroeconomics or School

Keynesian Macroeconomics or School.

We shall also like at the New Classical School and New

Keynesian School.

lecture 1 macroeconomics

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