Cawangan

Kelantan
Kampus
Machang

Chapter 1
Introduction to Macroeconomics
Learning 1)Define macroeconomics

outcome: 2)Differentiate
macroeconomics
between
and
Students should be able microeconomics
to do the following by
the end of this chapter: 3)Explain objectives of
macroeconomics in
conventional and Islamic
perspective
 Learning Outcome 1 & 2
• Define macroeconomics
• Differentiate between macroeconomics
and microeconomics
 Definition of Economics
Study of how people use their limited resources to fulfill unlimited wants and need.
Economists study the choices we make and also the consequences of these choices

Divided into two

branches:

Microeconomics
•focuses on the choices made by individual
participant in the economy, like as
consumers, workers, business managers,
and investors, to get a close look at the
economy.
•deal with price and output in particular
markets, as well as the relationship between
markets.
•E.g: household income, individual prices
and production of particular product.
Macroeconomics
•considers the economy's overall
performance and examines it from a larger
viewpoint. It is the study of the economy as a
whole and also referred to as aggregate
economic activity.
•the branch of economics that studies the
total, or aggregate, economy's structure,
performance, behavior, and decision-making.
•E.g: national income, general price level and
national/total output
Learning Outcome 3
Objectives of macroeconomics in
conventional and Islamic perspective
 Macroeconomics Objectives:
Conventional Perspective
Full Employment
•Full employment is the situation when all
resources in the economy are fully employed.
This means all the resources in the economy are
completely used.
•The higher the level of output of goods and
services and the higher the standard of living,
the more completely resources are utilized.
•Unemployment caused full employment cannot
be achieved.
•In the economy, unemployment means that
existing production factors are not being
employed to produce goods and services. As a
result, the country would suffer from inefficiency
and waste of resources.
•High unemployment will cause poverty and the
standard of living will continue to decline.
Price Stability
•Price stability refers to the lack of overall
changes in the prices of commodities, services,
and resources.
•Price stability will be impossible to achieve due to
inflation.
•Inflation is defined as a long-term increase in an
economy's price level. Fewer items and services
can be purchased when the general price level rises.
As a result, inflation reflects a loss of real value
and a decrease in purchasing power per unit of
money.
•Inflation has a number of negative consequences,
including a rise in the opportunity cost of
holding money, a disincentive to invest and save,
and shortages of products as customers begin
stockpiling in anticipation of future price
increases.
 Macroeconomics Objectives:
Conventional Perspective (cont…)
Equitable Distribution of Income
Economic Growth
•Most countries/governments attempt to minimize the income
•Economic growth is defined as an distribution range/gap by lowering the incomes of those at
increase in the production of the top and raising the incomes of those at the bottom.
economic commodities and
services when comparing one period •Taxation for higher income groups and subsidies for lower
of time to another.
income groups are two methods for changing the size of the
•Economic growth can be divided distribution of income.
into actual growth and potential
growth. Actual growth refers to the
increase in what is actually
produced, whereas potential
growth refers to the rate at which
Equilibrium in Foreign Sector
the economy could grow if all of its •A country will strive to achieve a surplus overall balance of
resources were used. payments (more money coming in than money going out).
•Economic growth can be aided by Continued surpluses, on the other hand, will lead to inflation.
increases in capital goods, labor •If there is a deficit, the country will have to borrow money
force, technology, and human from overseas or attract foreign deposits (increase debt). As a
capital – increase in goods and result, high interest rates are paid, and the country's debt grows.
services.
 Macroeconomics Objectives:
Islamic Perspective
Social Justice
•Based on the concept that Allah owns
everything in the universe. As God’s caliph
on earth, man has been given ownership of
these benefits.
•As a trustee, he must use whatever is handed
to him rather than as an absolute owner. In
Islam, social justice is grounded in man's
beliefs. A man of faith is obligated to do
justice.
•Satisfaction of all essential human
requirements, elimination of all major
sources of hardship and pain, enhancement
of moral and material quality of life, and
implementation of compulsory and
voluntary income redistribution will
increase human happiness.
Universal Education
•In Islam, knowledge is required or
obligatory, and everyone should have equal
access to education.
•Universal education must be funded or
provided for free in order for men of
different wealth and property to be able to
benefit from it.
•As a result, the government must give
opportunities for education and training to
individuals from various socioeconomic
backgrounds, ensuring that all citizens obtain
an equal education.
 Macroeconomics Objectives:
Islamic Perspective (cont…)
Optimal rate of economic
growth
•An Islamic economy's growth is
comprehensive, encompassing moral,
spiritual, and material aspects of man's
life.
•Human capital and material capital are
both important components of capital
formation. All economic activity revolves
around man.
•Because education is regarded an
investment, this factor should influence
the composition of investment.
Maximization of employment
generation
•Economic growth contributes the most to
the creation of new job possibilities.
•The government must take responsibility in
order to provide more work or job
possibilities to society.
•When all of the resources are fully
employed, it will result in efficient human
resource utilization because new ideas
will be generated and demand for goods
and services will rise. As a result, more
extra jobs will be generated.
ANY QUESTIONS?
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