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ECProject B

ECO 220 Page 1

Intro to macroeconomy
Monday, July 12, 2010 11:38 PM

Microeconomy vs macroeconomy

Microeconomy= Studies individual economics unit such as household, firms and government

Macroeconomy= Studies the aggregate behavior of the entire Aggregate= the sub total of behavior off al individual in the economy

Macroeconomics goals Elements of the macroeconomy Government policies
Microeconomics goals from Islamic perspective Monetary policy -the tools used by the gov through central bank to control the supply of money expenditure -used to maintain the overall price level, to achieve higher economics growth, remove fluctuation Price stability To keep its inflation rate as low as possible Inflation occur when the overall price increase Inflation is based average price Inflation can reduce the purchasing power of consumer . >> inflation high, g& s purchased decreased. Full employment • Economy should use all its available resources more efficiently to attain maximum output • Consequences- economics loss to the society ,loss of self respect, • Maximum employment-less 4/6%

Social justice ○ Is defined as the minimum standard of living guaranteed by the Islamic state ○ Social justice can be attain by ○ Satisfaction of basic need ○ Implement of zakat ○ Removal sources of hardship and discomfort ○ Improvement of life quality by morally and materially

Balance between the needs of the individual and society • Islam perceives the needs of the personal rights if an individual • When conflict arrives between society and individual, the society is given more attention than individual needs

Fiscal policy • Policy concerning taxes and expenditure. • Purposes- to stabilize economy , • Tax from h/hold and firm will be used to public expenditure

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Household • Own all the factors of production • Provide service of f.o.d to gov and firm • Receive payment in term of rent, wages, interest and profit

Expansionary monetary • Curb recession • Increase amount of money
Optimum rate of economic growth • The riba is prohibited has become very limited • The divine guidance, al-Quran will guide the Muslims to realize this objective • Several strategies to achieve economic growth ○ Appropriate allocation of material resources ○ Equitable distribution of income and wealth

Contactionary fiscal - Bring economy out of inflation by increasing taxes and decreasing government expenditure -slows down growth

Rest of the world • The foreign sectors • Import and export goods

Full and efficient employment of human resources • Government needs to give educational opportunities and vocational training • Government must monitor the monetary rewards in accordance of their work

Contractionary monetary • Curb inflation • Money supply reduced

Expansionary fiscal -to get out of recession -reducing taxes, increasing gov expenditure -more income, more consumption

Equitable distribution of income • Disparities will create social friction • Taxation is a way to equalize • The use of expenditure/fiscal policy

Economic growth • Economy must operate in full capacity= increase in full production level • There are 4 phases- peaks, recession, trough, recovery • Is measured by full production unit per capita

Firms • Buy F.O.d from h/hold to produce and sells good • Provide g&s to gov and h/hold • Pays wages, rent, and interest to h/hold and gov • Receive revenue from sale

Government • Collects tax from h/hold and firm ] • Provide development and operational purposes • Buys F.O.D from h/hold

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