C1. Introduction To Macro

MACROECONOMICS
/nama/uitmctkd/Oct2021
Learning outcomes
To understand definition of
macroeconomics
To explain the difference between

macroeconomics & microeconomics
To discuss objectives of macroeconomics

from conventional & Islamic
Microeconomics vs Macroeconomics
Microeconomics Macroeconomics
• Studies individual • Studies the aggregate

economic units in detail behavior of the entire
such as household, a firm, economy.
and a government. • The study of the economic
• The study of individual system as a whole.
parts of economy • Eg: the national income, the
• Studies of wages, or trade cycle, the
income of labour. unemployment rate,
general price levels.
Objectives of Conventional Economics
An economy should use all its available resources

(land, labor, capital and entrepreneur) more
efficiently to attain maximum output.
Full employment refers to the level of employment

rate where there is no existence of cyclical or
involuntary unemployment.
More resources employed, the higher the output of

goods and services.
When there is unemployment, it means that an

available resource is not being used. This
indicates inefficiency and a waste of resources.
Unemployment rate in Malaysia 1999 - 2021
Economic growth can be described as an
expansion in national output over a given period
of time.
This growth can be measured by calculating the

percentage increase in national income for the
current period as compared to the previous
period.
The economy must be operating at optimum

capacity to get higher economic growth.
The economic growth of a nation does not move

constantly, but will experience short-term ups
and down called business cycle.
Expansion Peak
.
period during which aggregate output Highest point of a business cycle, where the
expands. Total employment, total production business is producing at almost full capacity and
and sales will experience growth in real terms the economy is at almost full employment.
Trough Recession
Lowest point of a business cycle, where the Period during which aggregate output declines
business is operating at below capacity and and indicates lower demand fewer output. Laid
unemployment is at a high level. off workers and create unemployment crisis.
Economic growth in Malaysia (2001 – 2019)
Price stability is to keep its inflation rate as low
as possible.
Inflation occurs when there is an increase in

the general price level.
Inflation can reduce the purchasing power of

consumers.
Inflation can lead to income not rising as fast as

prices, thereby penalizing certain groups of
people such as pensioner and fixed income
earners.
It is necessary for nations to ensure that economic
growth of a nation is shared equally among the
population
Income inequality is a major concern for policy

makers to resolve, particularly in multiracial
countries, such as Malaysia, Singapore, Australia
and the United States.
Most nations try to narrow the gap between the

higher income and the lower income groups.
This is to ensure that all people are equal in terms

of the standard of living.
Disparities in income will create social friction and

bring about many problems
Taxation and subsidies is the method of achieving

an equitable distribution of income.
Foreign sector refers to economic transaction or
activities that take beyond the political
boundaries.
It includes transactions such as import and

exports, investments in other countries and
inter-country tourism.
A country will try to get an overall surplus of

balance of payment (BOP) that indicates
greater inflow than outflow of money.
Balance of payment is a statement that records

all the transaction between one country and the
rest of the world.
If a country faces a BOP deficit, it means that the
country will have to borrow from other countries,
whereas a prolonged BOP surplus will lead to
inflation.
Objective of Islamic economics
1. To achieve social justice
• Social justice aims to achieve spiritual salvation to human happiness.
• It is based on the principles that all existence in the universe belongs
to Allah.
• Man has been granted the ownership of these bounties.
• He must therefore use whatever is given to him as a trustee and not
as an absolute owner.
• Social justice can attain its objective via:
• i - Satisfaction of all human basic needs
• ii- The implementation of zakat
• iii- Removal of all major hardship and discomfort
• iv- Improvement of the quality of life, morally and materially.
2. Equitable distribution of income
• Islam offers a very moderate economic system and minimum standard of

living guaranteed by the Islamic State.
• Based on 3 principles: Aqidah, Syariah, Akhlaq.
• Economic decisions undertaken by anyone is to make decision such a way
to earn approval of Allah s.w.t. to achieve Al-falah.
• Islam perceives the needs of an individual as very important especially from
the perspectives of the personal rights of an individual.
• However the needs of society far outweigh that of the individual.
• When conflict arises between the need of an individual and those of society,
the need of society are given prominence and therefore are more important
than that of an individual’s need.
3. Provide universal education.
• Acquired knowledge is compulsory in Islam.

• Thus, every child must be given an equal opportunity to
education.
• The universal education should be provided for the
knowledgeable generation.
• In an Islamic economy, the government must subsidize or
provide free education to ensure that education is available
to all, regardless of one’s financial standing and
possession of properties.
4. Achieve optimal rate of economic growth
• The optimum growth of the economy through the efficient
usage of material resources will bring about full and
efficient employment of human resources.
• Emphasizes on human capital formation include the
moral, spiritual & material aspects of human life.
• An equitable distribution of income and wealth,
mobilization of investment and savings for economic
development also will increase the optimum rate of
economic growth.
5. To maximize employment generation
• Ensure that economic growth results in a “maximum”

contribution to the creation of new employment
opportunities.
• Additional employment in the long run must be generated
in a technically efficient manner with suitable technology
in line with resource endowment.
• Ensuring sufficient employment also includes the need to
provide educational and training opportunities in the
specific field.
References
• Deviga Vengedasalam and Karunagaran Madhavan, (2007) Principles of Economics,
Oxford Fajar.
• Parkin, M. (2010) Economics. 9th edition, New York: Pearson.
• McConnell Brue, Economics (16th Ed.), 2005, Mc Graw Hill
• Begg. D, Fischer. S and Dornbusch. R., Economics, 2004, Mc Graw Hill.
• John Sloman, Economics (6th Ed.), 2006, Prentice Hall, Edinburgh.
• Hassan, Zubir, (2009) Introduction to Macroeconomics: An Islamic Perspective, 2nd
edition, King Abdul Aziz University: Islamic Economics Research Centre and INCEIF
• Hassan, Zubir (2009) Markets and the role of government in an economy from Islamic
perspective, Encyclopedia of Islamic Economics, vol 3, Islamic Foundation, UK.
• Slavin Stephen L. (2007) Economics. International Edition, McGraw Hill.
• Nur Huda Abdul Wahab et.al., (2010) Economic Theory in the Malaysian Context,
Singapore: Cengage Learning.
• Case, Fair & Oster (2009) Principles of Economics, 9th Ed, Pearson.
THE END

C1. Introduction To Macro

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MACROECONOMICS

To explain the difference between

To discuss objectives of macroeconomics

• Studies individual • Studies the aggregate

An economy should use all its available resources

Full employment refers to the level of employment

More resources employed, the higher the output of

When there is unemployment, it means that an

This growth can be measured by calculating the

The economy must be operating at optimum

The economic growth of a nation does not move

Inflation occurs when there is an increase in

Inflation can reduce the purchasing power of

Inflation can lead to income not rising as fast as

Income inequality is a major concern for policy

Most nations try to narrow the gap between the

This is to ensure that all people are equal in terms

Disparities in income will create social friction and

Taxation and subsidies is the method of achieving

It includes transactions such as import and

A country will try to get an overall surplus of

Balance of payment is a statement that records

• Islam offers a very moderate economic system and minimum standard of

• Acquired knowledge is compulsory in Islam.

• Ensure that economic growth results in a “maximum”

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