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Macro Economics

Macro Economics

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Published by: Pratik Priyasmit Sahoo on Dec 20, 2011
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Ma cro economics is related to the study of structure , prformance and behaviour of the economy as a whole.

Economics is the study of the mankind in the ordinary business of mankind which is generated from the production and consumption of goods.Macroeconomics is relatively recent in its origin.The great depression gave rise to the thought of macroeconomics.the concept of macro economics was laid down by british economist Hon Maynard Keynes.Macroeconomica was evolved from the classical thought of the macro economic issues.The total school of thought is narrated in three parts I. II. III. Clasical macro economics Keynisian revolution and macro economics Post keynisian thoughts

CLASSICAL MACRO ECONOMICS The economic thoughts before the Keynesian revolution was addressed as the classical school.THE economist of this school of thoughts didn’t followed any type of theory or approach .They formulated the thoughts were developed in form of postulates. The school of thoughts highlights that demand and supply are allowed to work freely under some conditions likeI. II. III. Any macroeconomic event generates full emplyment in the long run but it might cause an unemployeement in the short run. At aggregate level neither over production nor under production takes place. In long run the economy always lies at the equilibrium.

All the theoriesof classical thought failed during the great depression in 1930.It exposed the “inadequency of the theoritical foundation of the classical laissezfaire doctrine.”The classical macroeconomic thought principles failed .The classical economics was not capable of predicting ,explaining and providing solution to the economic problems which resulted from economic dibacles like depression.

KEYNESIAN REVOLUTION The collapse in the classicaleconomy faciliated to a fresh look at working on the economic system and they tried to devise a corrective policy to measure against the failures of the market economy. J M Keynes researched to find the solution to economic problems associated with great depression and he proposed a theory which laid to the foundation of macroeconomics. The theory was associated with I. II. III. Employeement Stability Growth

The key points of Keynesian macroeconomic model were

The aggregate demand can be determined from thelevel of output and employeement in the economy provided the resources are given. The demand deficiency can be removed by compensatory government spending.I. III. The main cause of unemployeemeny in any country is caused by lack of aggregate demand and economic fluctuations caused by demand efficiency. II. For stable growth of the economy the government should go for demand management .Keynesian theory brought a revolutionary change in the thinking pattern of the economists. .Keynesian economic principle highlighted on the government expenditure on national income.

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