Historical Background of

Macroeconomics
& its performances on Bangladesh
Economy

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Topic Outline:

 Historical background of Macroeconomics

• Classical Era
• Great Depression
• Keynesian Era
 Macroeconomics performances on
Bangladesh Economy
• Real GDP Growth
• Inflation
• Unemployment

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Historical Background of Macroeconomics
Macroeconomics actually focuses the aggregate change in the economy.
Classical Era:
After 1930s, to remove some problems few economist made some
theories, which period is named by the classical era of macroeconomics.
Five major contributors on classical era:

Name Book
Adam Smith The Wealth of Nation

David Ricardo Principles of Political Economy and

Taxation
Thomas Robert Malthus Essay on the Principle of Population
as it Affects the Improvement of the
Society
Jean Baptiste Say Treatise on Political Economy

Von Thunen The Isolated State 3

The following are the assumption of classical school:
 The classical economists had faith in laissez faire.
 Economy is in here full employment.
 Wage and price are flexible.
 Classical economy considered in long run.
 Market disequilibrium is self correctable.
 Aggregate supply curve is vertical.

Great Depression:
The Great Depression (1929-39) was the deepest and longest-lasting
economic downturn in the history of the Western industrialized
world.

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Causes of Great Depression:
 Stock market crash of 1929
 Bank failures
 Reduction in purchasing across the board
 American economic policy with Europe
 Drought conditions

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Great Depression on USA:
The occurrence which are occurred during the Great
Depression on USA shown below:

Percent

Unemployment rate Inflation Real GNP

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 Keynesian Era:
Keynesians focus on aggregate demand as the principal
factor in issues like unemployment and the business cycle.

Keynesian follows the basic assumptions:

 Economy may not be in full employment.
 Wages are rigid and prices are sticky.
 They have faith in fiscal policy.
 Aggregate supply is upward sloping.
 There is no automatic self-adjusting character of the economy.

 
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Historical fluctuation of Bangladesh Economy
Growth trend, inflation & unemployment are the major factors
of macroeconomics.
Real GDP Growth:
The growth rate with the years of 1990-2012 highlighted:
8
7 6.71
6.3 6.526.3 6.37 6.32
6 5.776.1 6.03
5.3 5.425.6 5.42
5 4.6 4.8 4.775.01 5.04 4.834.84
4.2 4.324.51
4
3
2
1
0

Real GDP Growth Rate (%) 8

Inflation:
The inflation rate with the years of 1990-2012 highlighted:

9
Unemployment:
That the unemployment rate with the years of 2001-2012
highlighted:

45
40 40 40 40 40
35 35.2 35.2
30
25
20
15
10
5 4.3 5 5
2.5 2.5 2.5 2.5 2.5
0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

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The real GDP growth rate, inflation rate, and unemployment rate with
the years of 1999-2012 simultaneously:
60
50 35.2 40 40 40
40
35.2
40
30
20 4.3 5 5
2.5 2.5 2.5
9.1 2.5 8.8 10.62
9 9 6 7 7.2 8.9 2.5
10 5.8 5.8 5.6 5.4
3.1
5.42 5.6 4.83 4.84 5.77 6.1 6.3 6.52 6.3 6.03 5.42 6.37 6.71 6.32
0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Unemployment rate Inflation rate Real GDP Growth rate

Inflation, unemployment and growth trend are highly correlated.

Inflation is higher in recent years comparing with past decade. Growth
trend is upward till the inflation rate is 7 percent. At the same time
unemployment rate is inverse all the time with inflation rate. 11
THANKS
TO
ALL

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