1.

What are the main features of Macroeconomics and what is the central issue to
be addressed in Macroeconomics? Your Answer need to be related to Oman’s
economy.

Unlike microeconomics, macro-economics deals with the study of the economy as a

whole. There are many ingredients that influence the health of macro-economics.
When these ingredients are studied and analyzed, they give us the overall picture of
the economy (Investopedia). Consumers, firms, and governments use the results
drawn from the analysis to make their future decisions. There are three things that are
mainly involved in the macroeconomic decision making; the gross domestic product,
indicating the overall income of the economy, the rate of unemployment, and the
overall price level in the economy. Based on the above factors, macro-economics has
the following features.

The first feature of macro-economics is it studies the aggregates. As it becomes clear

from the definition of macro-economics, this branch of economics deals with the
economy. Instead of looking at every bit of the economy, it combines them and gives
us the picture of a country's economic condition, where it stands. For example, instead
of looking at every individual's income, it concentrates on the national income;
instead of individual items' prices, it looks at the general price level in the economy.
The second feature, according to Hemawad (2016), is the “lumping method.” This is
the study of the different aspects of the economy taken as a whole, for example,
instead of individual income, it studies the income of the country as a whole. This
kind of approach is necessary to determine the level of unemployment and other
economic problems. The third feature of macro-economics is it deals with the general
equilibrium analysis. Being the whole analytical tool macro-economics is based on
the equilibrium of all the ingredients in an economy as a whole. The reason for this is
because macroeconomics deals with the system overall, and it builds the relationships
among different variables of the economy. It builds the relationships between the
variable and their dependence on each other. The fourth feature of macroeconomics is
the study of income level. It analyzes the gross domestic product, also known as the
national income of an economy, and its factors. The next feature in line is the policy
oriented nature of macroeconomics. It helps the policymakers develop policies to
 uplift economic growth, deal with the level of inflation, and find solutions for other
economic problems. Last but not the least feature of macroeconomic is the theory of
general price. In this, changes in the level of general price are studied, and the factors
influencing it are determined, and measures to counter the rise in general price are
being considered.

In Oman's context, the Macro-economic issue that the country is being dealing with
for the last half a decade is the general price level as the country’s economy is heavily
dependent on its oil reserves and its exports. So, when the oil prices fell in 2014, the
economy was hit badly, and inflation and unemployment rose in the country. The
same is happening again in the contemporary time as the oil price are hugely affected
by the corona pandemic. In order to deal with this issue, Oman has to diversify its
economic dependence instead of heavily depending on one economic ingredient.

2. Try to analyse Oman’s National Income in last 5 years.

In your words explain how Oman economic growth is effected by Price in last 5
years

National Income, also known as the Gross Domestic Product, is the sum of all the
services and goods produced by a country in a fiscal year due to all the economic
activities. 

Figure 1
As it is clear from the formal that national income is dependent on different variables.
If anyone of the variable changes it affects the whole income. It can be said that if the
national income of a country depends heavily on one factor, it becomes difficult for
that country to control the economy if that one variable gets disturbed. In the case of
the Oman’s economy, oil makes a huge part of the economy. Due to the large oil and
gas reserves, the government extracts them and exports them to run the economy of
the country. The reluctance of the state did not look for other avenues to boost the
economy. The result of the this was seen in 2014 and most recently in 2020 when the
oil price was hugely hit. In 2014 when the oil price fell down, it crippled Oman's
economy. “the sharp fall of oil prices since mid 2014 significantly reduced state
revenues (total oil and gas revenues halved between 2014 and 2017) and put
significant pressure on the Omani economy”. During these years, the national
economy of the Omani economy was in negative. It was – 0.9% in 2017, but in 2018
after the oil prices recovered on the international market, it rosed up to 2%.

Figure 2
Source: World Bank

According to BTI 2020 Oman Country Report (2020), the Omani economy and the
government income was constituted of 73% of oil revenues even in a situation like
2017 when the oil price was at its lowest. This causes the state to run in deficit. The
account deficit was 21% in 2016 and 12% in 2017. The problem that lies with the
dependence on one entity for a huge part of the revenue is when that entity hits, and
then the whole economy falls into recession. It happened with Oman. To deal with the
inflation and account deficits, Oman borrowed money from its neighbors, which has a
negative effect on its current account deficit (Forbes, 2020). Due to low oil prices, the
government revenue also fell, resulting in the government cutting on public spending.
According to Reuters (2020), in 2019, the oil and gas sector made a huge part of the
government, which is 80%. In this year, due to the corona pandemic, the oil prices fell
down and hit the economy again. In 2019 the fiscal deficit was around 8%, but due to
the shock to the oil prices in 2020, the fiscal deficit rose to 19% of the gross domestic
product. Oman has to learn a lesson from here. There are other avenues to diversify
the economy like tourism, manufacturing, fishing, and many more. The diversification
of the economic machinery will help the state and economy in a situation like these. 
References
BTI Transformation Index (2020) “Oman Country Reoprt 2020” [online], accessed
February 25, 2021 https://www.bti-project.org/en/reports/country-report-OMN-
2020.html#pos14
Forbes (2020) “Where does Oman’s economy go from here?” [online], accessed
February 25, 2021 https://www.forbes.com/sites/dominicdudley/2020/01/14/oman-
economy/?sh=28c40a343d26
Hemwad (2016) “main features of macro-economics” EconLeaks [online], accessed
February 25, 2021, http://www.econleaks.com/main-features-of-macro-economics/
Reuters (2020), “Analysis: reform momentum of Oman’s new ruler faces headwind of
COVID-19 reality” [online] accessed February 25, 2021
https://www.reuters.com/article/oman-economy/analysis-reform-momentum-of-
omans-new-ruler-faces-headwind-of-covid-19-reality-idUKL8N2H42DP
The World Bank (2020) “Oman’s Economic Update” [online] accessed February 25,
2021 https://www.worldbank.org/en/country/gcc/publication/oman-economic-update-
april-2020