Submitted To: Sir Abdullah Iqbal

Submitted By: Muhammad Saqib

Semester: 1
Roll no: ADP (B.A) F22-06
Subject Micro and Macro
Economics
Date: 18-March-2023
Introduction
To Macro Economics
Macro Economics

Macroeconomics is the branch of economics that studies the behavior and

performance of an economy as a whole. It focuses on the aggregate changes
in the economy such as unemployment, growth rate, gross domestic product,
and inflation.
Macro Economics Variable

We’ve touched on several macroeconomic variables above through wider

objectives. These are used to measure the economy’s current state and
forecast where it’s going, identifying potential risks along the way.
Enlist the Macro Economics Variable

Here are some of the most important macroeconomic variables to monitor:

 GDP growth

 Money supply

 Unemployment rate

 Inflation rate
GDP Growth

GDP growth refers to the percent change in real GDP, which corrects the
nominal GDP figure for inflation. Real GDP is therefore also referred to as
inflation-adjusted GDP or GDP in constant prices.
Money Supply

The money supply refers to the total volume of currency held by the public
at a particular point in time. The money supply is the total amount of money
cash, coins, and balances in bank accounts in circulation.
Unemployment Rate

The unemployment rate is the percentage of people in the labor force who
are unemployed. In simple terms, the unemployment rate for any area is the
number of area residents without a job and looking for work divided by the
total number of area residents in the labor force.
Inflation Rate

Inflation is the rate of increase in prices over a given period. Inflation is

typically a broad measure, such as the overall increase in prices or the
increase in the cost of living in a country. it means you can buy less for Rs
100/- today than you could yesterday.
Mutual Relationship
Of Macro Economic Variables
Inflation and Unemployment:

There is an inverse relationship between inflation and unemployment,

known as the Phillips curve. This relationship suggests that as
unemployment falls, inflation rises, and inflation falls, employment rises.
GDP and Employment:

There is a positive relationship between GDP and employment, as a growing

economy typically creates more job opportunities, which in turn leads to
increased consumer spending and higher GDP.
Trade Balance and Exchange rates:

The trade balance is the difference between a country's exports and imports,
while exchange rates are the value of one currency to another. There is a
relationship between trade balance and exchange rates, as a country with a
trade deficit (more imports than exports) will typically see a weaker
exchange rate, while a country with a trade surplus (more exports than
imports) will typically see a stronger exchange rate.
Nominal vs Real GDP

• Nominal GDP:
• Nominal is the total value of all goods and services produced in a given time period,
usually quarterly or annually.

• Real GDP:
• Real GDP is a nominal GDP adjusted for inflation. The actual growth of production
without any distorting effect from inflation.
Per capita income:
The average income of the people of a country in a particular
year is called capita Income for that year.

Per capita income for 2013 = National Income 2013.

Population in 2013

Standard of living:
The standard of living is the number of goods and services available to purchase in a
country. Real GDP per capita and gross National Income per capita are the two most
common ways to measure the standard of living.
GDP Deflator:
The GDP deflator also called the implicit price deflator, is a measure of inflation. It is a ratio of
the value of goods and services an economy produces in a particular year at current prices to that

of price prevailing during the base year.

Define Money:
A medium of exchange that is centralized, generally accepted, recognized, and facilitates
transactions of goods and services, is known as money.

 Acceptable
 Medium of exchange
 Unit of Measurement
Fiat Money:
A fiat money is a type of currency that is declared legal tender by a government
but has no intrinsic or fixed value and is not backed by any tangible asset, such
as gold or silver.

Barter system:
Money is a medium of exchange, whereas in the barter system, money is not used as a medium
of exchange, rather one type of good is exchanged for another type of good. An example of a
barter system is selling rice to purchase wheat.
Monetary Policy:
A policy which used to control the money system in a country . Monetary policy involves
central banks, use of instruments to influence interest rates or money supply in the economy
with the objective to keep overall prices and financial markets stable.

Fiscal Policy:
Fiscal policy is the use of government spending and taxation to influence the economy.
Typically, fiscal policy comes into play during a recession or a period of inflation, where
conditions are escalating quickly enough to warrant government intervention .
Thank you