Notesale: Turn your study into money

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Macroeconomics: The Study of Aggregate Economy
Macroeconomics is the study of the economy's overall functioning
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Macroeconomics is critical for government officials to
comprehend and forecast the long-term effects of their policies
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The aims are backed by objectives such as reducing unemployment, boosting productivity, regulating
inflation, and others
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Economic Indicators
Gross Domestic Product (GDP)
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The government
normally calculates and releases GDP on a quarterly or annual basis
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Individual consumer demand propels firms, corporate
investments stimulate growth, and government expenditure ensures social welfare
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Positive net exports indicate a
trade surplus, whilst negative net exports indicate a trade deficit
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Inflation
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It arises mostly as a result of increasing demand for goods and services, which raises prices
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However, excessive inflation may be damaging if purchasing power falls far more than increased
prices, reducing overall expenditure and depreciating the currency
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Unemployment
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People who are retired or handicapped are not counted as jobless
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Unemployment can be classified into several
categories:
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Frictional Unemployment
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Structural Unemployment
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Cyclical Unemployment
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Natural unemployment is the sum of frictional and structural unemployment
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Natural unemployment is calculated as the sum of natural and cyclical unemployment
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Employment is a useful predictor of economic circumstances since it is directly tied to economic
production
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Interest Rates
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They are
established by the central bank, which in the United States is the Federal Reserve and in Canada is the
Bank of Canada
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Borrowing becomes more expensive when interest rates are high, therefore customers are pushed to
cut back on their expenditures
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How Does the Government Influence the Macroeconomy
Monetary Policy
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For immediate outcomes, the central bank might establish
interest rate goals
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Interest rates, as previously said, have an impact on
both spending and investment
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In times of economic downturn, the government can
stimulate growth by enacting an expansionary monetary policy
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Contractionary Monetary Policy
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To reduce inflation, the government can reduce
the money supply and raise interest rates by selling assets on the open market, tightening
reserve requirements, and raising the target interest rate
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To steer the macroeconomy, the government conducts fiscal policy through spending
and taxation
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Taxes have an impact on consumer discretionary
income
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Governments boost expenditure to increase money in circulation
or decrease taxes to give consumers more money to spend to increase inflation
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Governments restrict expenditure to lower the amount of
money in circulation or raise taxes to reduce inflation
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Importance of Macroeconomics
Functioning of an Economy
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It is critical to have a thorough and correct understanding of the behavior pattern of the aggregative
variables since describing a vast and complex economic system in terms of multiple individual things
is unachievable
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Macroeconomics is extremely useful in developing economic
policy
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Governments interact with groups and masses of people rather than individuals,
emphasizing the necessity of macroeconomic research
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Understanding Macroeconomics
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No Microeconomic law could be formulated without first studying
aggregates; for example, the theory of individual firm could not have been formulated regarding the
behavior pattern of one single firm, however representative it might have been; the theory was only
possible after the behavior pattern of several firms had been examined and analyzed, for example,
the forest, though an aggregation of trees, does not exhibit the behavior and characteristics of I
Microeconomics has been and continues to be a jungle of specific assumptions, unique situations,
inadequate measures, and abstract theorizing
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Economic fluctuations are a defining aspect
of a capitalist society
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As a result, we are compelled to investigate the reasons for variations in income, production, and
employment to manage or, at the very least, mitigate their severity
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The macroeconomic perspective is critical for analyzing and comprehending
the implications of inflation and deflation
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The macroeconomic analysis enables us to take specific efforts to mitigate
the negative effects of inflation and deflation
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The study of national income and social accounts has grown in relevance
as a result of the study of macroeconomics
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The study of national income permits us to know that three-fourths of the world's population lives in
abject poverty
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Study of Economic Development
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The study of macroeconomics has shown not only the obvious disparities of wealth within an economy
but also the significant discrepancies in the living standards of individuals in various nations,
prompting the taking of major initiatives to increase their economic wellbeing
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Macroeconomics assists us in comprehending and analyzing the
operation of an economy
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Estimates of Gross National Product (GNP) or National Income (NI) are used to measure an economy's
performance over time by comparing the production of goods and services in one period to that of
other periods
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Nature of Material Welfare
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Measuring social wellbeing is a difficult topic; even welfare economics
does not help us
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This increases the relevance of macroeconomics because when the primary goal of economic studies
is the welfare of the entire society, economics becomes the study of macroeconomics
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It is not a thorough analysis since, instead of studying
individual units, the entire economy is evaluated collectively, hence the relevance of an undivided unit
is studied
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Policies are developed based on the entire economy, which might
be hazardous to specific enterprises and commodities
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Difficult to Find Out Macro Quantities
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Index number, a flaw in
assigning weight to an index number
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No Attention to Structure and Composition of Group
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