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7100000
6100000
5100000
4100000
3100000
2100000
1100000
100000
1960
1950
1970
1980
1990
2000
2010
What Macroeconomics Is About
Per capita GDP, India (1884- 2010). Intl GK$
3500
3000
2500
2000
1500
1000
500
1880
1900
1920
1940
1960
1980
2000
What Macroeconomics Is About
Output of the U.S. economy, 18692014
What Macroeconomics Is About
Long-run economic growth
Output of United States since 1869
Note decline in output in recessions; increase in output in some wars
Two main sources of growth
Population growth
Increases in average labor productivity
Per capita output in India is increasing for decades.
What Macroeconomics Is About
Average labor productivity
Output produced per unit of labor input
What Macroeconomics Is About
What Macroeconomics Is About
Business cycles
Business cycle: Short-run contractions and expansions in economic activity
Downward phase is called a recession
What Macroeconomics Is About
What Macroeconomics Is About
Unemployment
Unemployment: the number of people who are available for work and
actively seeking work but cannot find jobs
Recessions cause unemployment rate to rise
Inflation
Deflation: when prices of most goods and services decline
Inflation rate: the percentage increase in the level of prices
Hyperinflation: an extremely high rate of inflation
Indian experience is shown in next figure.
What Macroeconomics Is About
Combined
Month Commodity Description Provisional / Final
Current Month Inflation Y-o-Y
30
25
20
15
10
0
1960 1970 1980 1990 2000 2010 2020
Import Export
What Macroeconomics Is About
Macroeconomic Policy
Fiscal policy: government spending and taxation
Effects of changes in federal budget
Relation to trade deficit?
Monetary policy: growth of money supply; determined by central bank; the
Fed in United States
What Macroeconomics Is About
Fiscal Deficit (% of GDP), India: 1975-76 to 2016-17