CHAPTER 9

INTRODUCTION TO MACROECONOMICS
 LEARNING OUTCOMES

At the end of this chapter, you should be able to:

 Interpret the meaning of macroeconomics.
 Distinguish the differences between macroeconomics
and microeconomics.
 State and explain the objectives of macroeconomics
from the conventional and Islamic perspectives.

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 INTRODUCTION TO
MACROECONOMICS

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 INTRODUCTION TO
MACROECONOMICS (cont.)

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 OBJECTIVES OF MACROECONOMICS

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 OBJECTIVES OF MACROECONOMICS
(cont.)

Macroeconomic Objectives from the Conventional

Perspective

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 OBJECTIVES OF MACROECONOMICS
(cont.)

(1) To Achieve Full Employment

Full employment does not mean there is no unemployed or
jobless people in the economy.
It is difficult to assume that full employment refers to 100%
of the labour force is being employed.
The potential benefits of full employment in an economy are
that it can optimize the available resources efficiently.
The crucial consequences of unemployment to the
economy are wastage of available resources and social
problems.

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 OBJECTIVES OF MACROECONOMICS
(cont.)

(2) To Achieve Price Stability

A high degree of inflation rate that is associated with a
sustained increase in the general price level can be
disastrous to an economy.
To the consumers, inflation directly influences their
purchasing power. The quantity of goods and services
purchased will be less if inflation is high.
Maintaining price stability is beneficial because it means
uncertainty and disruptions in the economy are avoided. It
means consumers and businesses can safely pursue long-
term consumption and production plans.

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 OBJECTIVES OF MACROECONOMICS
(cont.)

(3) To Achieve Economic Growth

Economic growth can be described as expansion in
national output over a given period of time.
As long as a nation achieves economic growth it tells us
that the economic performance is positive.
However, an economy will not always encounter an upward
trend over time as economies tend to experience short-term
ups and downs in their performance. This is called a
business cycle.

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 OBJECTIVES OF MACROECONOMICS
(cont.)

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 OBJECTIVES OF MACROECONOMICS
(cont.)

(4) To Achieve an Equitable Distribution of Income

It is necessary to ensure that the economic growth of a
nation is shared equally among the population
Generally, policymakers try to ensure that there is no wide
gap between the rich and the poor.
This is to ensure that all people are equal in terms of
standard of living.
Disparities of income will create social friction and bring out
many problems.

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 OBJECTIVES OF MACROECONOMICS
(cont.)

(5) To Achieve Equilibrium in the Foreign Sector

Foreign sector means economic transactions or activities
that take place beyond the political boundaries.
If a country faces balance of payment (BOP) deficit, it
means that the country will have to borrow from overseas
and leads to high debt problems whereas a prolonged BOP
surplus will lead to inflation.
Thus it is important for a country to understand and
determine the favourable scale of their BOP.

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