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Introduction

Introduction. Macroeconomics is the study of the structure and performance of national economies and of the government policies used to influence economic performance. Indicators of Structure: Consumption, Investment, Savings, Wages, Export-Import etc.

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Introduction

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  1. Introduction • Macroeconomics is the study of the structure and performance of national economies and of the government policies used to influence economic performance. • Indicators of Structure: Consumption, Investment, Savings, Wages, Export-Import etc. • Indicators of Performance: GDP, GDP Growth Rate, Unemployment Rate, Inflation Rate etc.

  2. MACROECONOMICS • Government Policies • Fiscal Policy - Policies related to taxes and government expenditure. • Monetary Policy – Policies related to money supply.

  3. What Macroeconomists Do? • Macroeconomic Forecasting - Prediction about macroeconomic variables • Macroeconomic Analysis – Understanding and working out implications of current macroeconomic events. • Macroeconomic Research – Developing and testing economic theories. Developing economic models.

  4. Steps in Developing Theories/Models • How reasonable and realistic the assumptions are? • Can we use the model to study real problems? • Can its predictions be empirically tested? • Empirical validity of its predictions?

  5. Two Schools of Thought • The Classical Approach – Markets are efficient and price adjustments quickly bring about market equilibrium. • The Keynesian Approach – Price adjustments are slow and market can remain in disequilibrium for a long period of time.

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