Macroeconomics

Dr. Algassim Mohamed Ebrahim

University of Khartoum
School of Management Studies
Undergraduate program
2022

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 Macroeconomic Indicators &
Current Economic Issues
Lecture (3) 11/6/2022

Contents:
Definition of macroeconomic indicators
Objectives of macroeconomic indicators
Key macroeconomic indicators
Sudan Economy

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Definition of Macroeconomic Indicators:

The economic performance of any country is measured by

standard indicators which cover all economic activities.
Macroeconomic indicators are aggregated statistics that
indicate the current status of an economy depending on a
particular area of the economy during a period of time,
these indicators are usually used by analysts/policy makers
to interpret current or future investment possibilities or to
judge the overall health of an economy.

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Objectives of macroeconomic indicators

1. Measuring the progress of national economy over a

specified period of time (usually one year).
2. Evaluating the contribution of different sectors of an
economy (agriculture, industry, services … etc.).
3. Focusing on the leading sector (the sector with the
highest rate of growth and that with high future
potential).
4. Tracing the direction of finance and whether that is
consistent with the relative importance of different
sectors.
5. Interpreting the bottlenecks that face the economy.

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Key Macroeconomic Indicators
a) Growth rate of economy:
It reflects the annual change in the national product/output (The value
of all goods and services produced in the country and is called
Gross Domestic Product "G.D.P.")
G.D.P. is discounted by the price index to eliminate the effects of
inflation on the growth rate of the economy to get the Real GDP.
Calculation of Growth Rate:

This rate is used for comparison between different countries. A high

rate of economic growth is appreciated because it reflects good
economic performance.

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Key Macroeconomic Indicators
b) Average per-capita income:
• This is measured by dividing national income (The total reward
"return" for factors of production because of their contribution
in the production process: wage + interest + rent + profit… )
over the size of population.
𝑁𝑎𝑡𝑖𝑜𝑛𝑎𝑙 𝐼𝑛𝑐𝑜𝑚𝑒
𝑃𝑒𝑟 − 𝐶𝑎𝑝𝑖𝑡𝑎 𝐼𝑛𝑐𝑜𝑚𝑒 =
𝑃𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛
c) Exchange rate of the national currency:
• It is measured by the value of the national currency in terms of
foreign currencies (usually the dollar). National currency could
be depreciating against foreign currencies because of the deficit
of BOP 1 Dollar = 575 Sudanese Pound.
• Exchange rates can be either fixed or floating. Fixed exchange
rates are decided by central bank of a country whereas floating
exchange rates are decided by the mechanism of market
demand and supply of currency.
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Key Macroeconomic Indicators
d) Balance of Payments (BOP.):
• The BOP is a systematic record of all economic transactions
between the residents of a country and the rest of the world during
a given period of time (usually one year) it measures the difference
between all money flowing into the country in a particular period
of time and the outflow of money to the rest of the world.
• The BOP consists of two components: the current account and the
capital account.
• Current Account: it is a statement of actual receipts and payments
in short period from export & import of services and goods,
interests, profits from/to abroad. There can be either surplus or
deficit in current account.
• Capital Account: It is the difference between the receipts and
payments in short period from all financial transactions that
involves inflows and outflows relating to investments, short,
medium and long-term borrowing/lending. It also includes private
foreign loan flow, movement in banking capital, official capital
transactions, reserves, gold movement etc.
• There can be surplus or deficit in capital account.
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Key Macroeconomic Indicators

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Key Macroeconomic Indicators
f) Inflation rate:
It is the persistent (continuous) rise in general price level (Consumer
Price Index - CPI) over a given period of time. (Inflation rate is
measured by annual changes in the general price level).
High rates of inflation are undesirable

Types of Inflation:
• Hyper Inflation (continuous, extremely high and rapid general
price increases in an economy it could be out of control).
• Suppressed Inflation. (when the government and the monetary
authorities controls the prices).
• Creeping Inflation (low but continuous increase in inflation over a
period of time, 1% to 4%).
• Imported Inflation (When the general price level increases in a
country because of increase in prices of imported commodities).
• Stagflation (is a condition caused by a combination of rising
inflation, slow economic growth and rising unemployment).
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Key Macroeconomic Indicators

Causes of Inflation:
•Demand Pull Inflation caused by excess of aggregate demand over
aggregate supply AD>AS.
•Cost Push Inflation caused by increases in the cost of production
initiated by increases in wages.
•Also there is inverse relationship between inflation rate and
unemployment rate according to Phillips 1958.
The classic Phillips curve argues that unemployment and inflation
are inversely related, as levels of unemployment decrease, inflation
increases. (So there is trade- off between the two indicators and
the relationship is not linear).

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Key Macroeconomic Indicators
Graphically, the below short-run Phillips curve traces an L-shape
when the unemployment rate is on the x-axis and the inflation rate
is on the y-axis.).

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Key Macroeconomic Indicators
Impact of Inflation
•Lower levels of savings.
•Depreciation of purchasing power of money (It has inverse
relationship with prices).
•Deficit in balance of payments due to imports increase.
•Failure to complete development projects because of cost
increase.
•Suffering of fixed income groups.
•Expectations would be geared towards higher prices in future. So,
investors would be reluctant to get involved in Long-term projects.
•Speculations would be the symptoms of the economy (Investment
in foreign currencies, real state)

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Key Macroeconomic Indicators
g) Unemployment rate:
In general, unemployment means not utilizing an economic
resource such as manpower, equipments, machines,
water ...etc. But there is focus on unemployment among
human being.
Unemployment rate is measured by dividing the number of
unemployed by the number of economically active population.
𝑼𝒏𝒆𝒎𝒑𝒍𝒐𝒚𝒆𝒅 𝒍𝒂𝒃𝒐𝒖𝒓
𝐔𝐧𝐞𝐦𝐩𝐥𝐨𝐲𝐦𝐞𝐧𝐭 𝐑𝐚𝐭𝐞 = × 𝟏𝟎𝟎
𝑬𝒄𝒐𝒏𝒐𝒎𝒊𝒄𝒂𝒍𝒍𝒚 𝑨𝒄𝒕𝒊𝒗𝒆 𝑷𝒐𝒑𝒖𝒍𝒂𝒕𝒊𝒐𝒏

As mentioned earlier, unemployment has negative impact on

economy and society.

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Key Macroeconomic Indicators
Types of Unemployment:
•Involuntary Unemployment & Voluntary Unemployment:
Involuntary unemployment is general understanding of
unemployment. While the voluntary unemployment refers to
individuals who do not have the willingness to work. 
•Structural Unemployment: It is the result of changes in the structure
of the economy at sectoral levels or as a result of new technology.
•Disguised Unemployment which is the result of over employment
(employing more labour than what is required). This happens in the
civil service and agricultural sector.
•Seasonal Unemployment which takes place when the work (need for
labour) is seasonal like in agriculture.
•Cyclical Unemployment: it is caused as a result of economic (business)
cycles (Ups and downs).

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Key Macroeconomic Indicators
Causes of Unemployment:
•Weak economic performance leading to lower rates of economic
growth.
•Lack of good basic infra-structure of the economy.
•Limited markets for consumers' goods produced domestically.
•Shortages of financing facilities for private sector.
•Technology replacement of human labour.

Impact of Unemployment:
•Some available resources are redundant (Unutilized).
•Lower rates of economic growth.
•Increase in number of poor inhabitances.
•Economic Crises are persistent.
•Increase in the rates of crimes and socially unacceptable behavior.
•Waste of resources in qualifying manpower but not having a
chance of employment.

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Key Macroeconomic Indicators
Possible Solutions for Unemployment:
•Increasing the capacity of economy by diversifying investment
opportunities.
•More public expenditures on infra-structural facilities.
•Linking investment tax exemptions with level of employment.
•Encouraging micro-finance and training programs and providing
grants for the unemployed to have more job opportunities.

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