SEBI Gr A 2020

Economics
Phase
1&2
Introduction to Macroeconomics

50% OFF on NABARD courses

Code: NABARD50
 Introduction to Macroeconomics
Micro Macro
Economics Economics
Microeconomics deals with the Macroeconomics studies how
analysis of small individual units the large aggregates such as-
of an economy such as-
✓ Total employment
✓ National product or national
income of an economy
Individual Individual ✓ General price level
Consumers Firms
are determined.

Individual It determines the level of

Markets total economic activity and
fluctuations.
It explains how the prices of products
and factors are determined.
 Origin of Macroeconomics
Classical Economists

• Full employment of labour and other

resources always prevailed in the economy.

• They concentrated on problem of

determination of prices, outputs and
resource employment in the individual
industries. Say’s Law
• They argued that involuntary unemployment ‘Supply creates its own demand’
and underutilization of the productive
capacities could not occur in the capitalist
Economies. Therefore, the problem of lack of
demand for supply of goods and services
• They believed in ‘Laissez Faire’ or ‘Let it be’. does not arise.
 Origin of Macroeconomics

Great Depression • He emphasized that prevailing depression and large-

scale involuntary unemployment was due to lack of
aggregate effective demand resulting from fall in
private investment.
• In this way, he laid the foundation of Macro
• Lot of Involuntary
economics.
unemployment.
• Sharp fall in GDP.
• In his theory, he showed that a free market economy
was not self correcting and therefore there was a
• Depression was caused by
need for the government to intervene and take
drastic decline in private
appropriate fiscal measures to restore full
investment.
employment in the economy.
 Major Issues of Macroeconomics

✓ The Problem of Unemployment

✓ Determination of National Income
✓ Problem of Inflation
✓ Business Cycles
✓ Stagflation
✓ Economic Growth
✓ Balance of Payments and Exchange Rate
 Role of Government in the
Macroeconomics
There are 3 types of economic policy that are used by the government to
influence the working of macroeconomics:

1. Fiscal Policy
2. Monetary Policy
3. Supply-side Policies
Fiscal Policy

• It refers to the taxation and expenditure decisions of the government.

• Classical Economists believed that the government budget should preferably be balanced.
i.e. Revenue collected (through taxes) = Expenditure made by the govt.

• But, Keynes showed that balanced budget is not good in all circumstances. He argued that
deficit budget should be made to get economy out of depression and to eliminate
involuntary unemployment.
 Role ofIntroduction
Government to Macroeconomicsin the

Macroeconomics
Monetary Policy

• It refers to the policies regarding growth of money supply,

availability of credit and interest or cost of credit.

• It is an important tool of controlling inflation in the economy.

Rate of
Interest is Contraction
Large Discourages
Rise in Price raised and of money
expansion in demand for
Level availability supply in the
money supply credit
of credit is economy.
reduced
 Role of Government in the
Macroeconomics

Supply-side policies

• This is a thought of economics that argues that government

policy should shift from demand management to stimulation
of aggregate supply of output.

Government should
More supply and more
reduce taxes to Price level will fall
investment will
increase the
increase the supply of and output will rise
incentives to work,
goods & services
save and invest
Happy Learning!