ECON 101

M AC R O E C O N O M IC S : S C O P E AN D C O N C E R N S
FS 2023-2024
CONTENT
01 MACROECONOMICS: ISSUES AND GOALS

02 POLICY INSTRUMENTS

03 BUSINESS CYCLE AND OUTPUT GAP

MACRECONOMICS:
ISSUES AND GOALS
 W H A T IS
M A C R O E C O N O M IC S ? ?
Macroeconomics is the study of the economy as a whole
- addresses many topical issues, e.g.:

Why have some countries experienced rapid growth in income over

the past century while others stay mired in poverty?

Why do some countries have high rates of inflation while others

maintain stable prices?

Why do all countries experience recessions and depressions- recurrent

periods of falling income and rising unemployment- and how can
government policy reduce the frequency and severity of these
episodes?
 SHOULD THE
GOVERNMENT
INTERVENE?
 MACROECONOMICS
ENCAPSULATED IN THREE MODELS

VERY LONG RUN LONG RUN SHORT RUN

VERY LONG RUN GROWTH
THE V ERY LONG RUN BEHA V IOR OF THE ECONOMY IS THE DOMA IN OF
GROWTH THEORY
 THE LONG RUN
THE ECONOMY WITH FIXED PRODUCTIV E CA PA CITY
THE SHORT RUN
SHORT RUN OUTPUT FLUCTUA TIONS
PO LICY
INSTRUMENTS
 FISCAL POLICY

Fiscal policy refers to the government’s use of

taxation and expenditures to achieve a country’s
economic objectives. The appropriate use of fiscal
policy can allow a country to increase output (GDP)
and lower unemployment.

The strategic use of tax structures, tax incentives,

and targeted subsidies and transfers can also move
workers and resources from low-productivity sectors
toward high-productivity industries where there may
be a comparative advantage.
 MONETARY POLICY

Monetary policy is how the

government manages the nation’s
money supply, credit, and banking
system. Government generally
conducts monetary policy by
buying and selling bonds and by
regulating financial institutions.
BUSINESS CYCLE
AND OUTPUT GAP
 OUTPUT GAP

The output gap measures the gap between

actual output and the output the economy could
produce at full employment given the existing
resources.

Full employment output is also called potential

output .
THANK YOU