37728655-Macro-Economic-Concepts

MACRO ECONOMIC CONCEPTS : 

MACRO ECONOMIC CONCEPTS www.a2zmba.com

Economic Growth : 

Economic Growth Economic growth is the increase in the value of goods and services produced by an economy. It is conventionally measured as the percent rate of increase in real gross domestic product, or GDP. www.a2zmba.com

Investment : 

Investment Investment or investing is a term with several closely-related meanings in finance and economics. It refers to the accumulation of some kind of asset in hopes of getting a future return from it. In theoretical economics, investment means the purchase (and thus the production) of capital goods - goods which are not consumed but instead used in future production. Examples include building a railroad, or a factory, given by the relation I = (Y, i). An increase in income will encourage higher investment, whereas a higher interest rate will discourage investment as it becomes costlier to borrow money. www.a2zmba.com

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In finance, investment means buying securities or other monetary or paper assets. Types of investments include equity investment or real estate investment, foreign currencies or bonds or postage stamps. These investments may then provide future cash flows and may increase or decrease in value. www.a2zmba.com

Aggregate Supply : 

Aggregate Supply Aggregate Supply is the total supply of goods and services by a national economy during a specific time period. www.a2zmba.com

Aggregate Demand : 

Aggregate Demand Aggregate Demand is the total demand for goods and services in the economy during a specific time period. It is often called effective demand or it is the demand for the gross domestic product of a country. www.a2zmba.com

Aggregate price : 

Aggregate price Aggregate Price level is a measure of the average level of prices of goods and services in the economy, relative to their prices at some fixed date in the past. www.a2zmba.com

Unemployment and general Price level. : 

Unemployment and general Price level. The British economist A W Phillips, in his 1958 paper "The relationship between unemployment and the rate of change of money wages in the UK 1861-1957" published in Economica, observed an inverse relationship between money wage changes and unemployment in the British economy over the period examined. The Phillips Curve Shows the trade-off between higher inflation and lower rate of unemployment. www.a2zmba.com

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New theories, such as rational expectations and the NAIRU (non-accelerating inflation rate of unemployment) arose to explain how stagflation could occur. The latter theory – also known as the theory of the ”natural” rate of unemployment – distinguished between the short-term Phillips curve and the long-term one. The short-term PC looked like a normal PC but shifted in the long run as expectations changed. In the long run, only a single rate of unemployment (the NAIRU or "natural" rate) was consistent with a stable inflation rate. The long-run PC was thus vertical, so there was no trade-off between inflation and unemployment. www.a2zmba.com

Rational Expectations : 

Rational Expectations Rational expectations is a theory, used to model the determination of expectations of future events by economic actors. It was originally proposed by John F Muth (1961). For example, suppose that P* is the equilibrium price in a simple market, determined by supply and demand. Then, the theory of rational expectations says that the expected price (Pe) would equal: Pe = P* + e where e is the random error term. On average, it equals zero. e is also independent of P*. www.a2zmba.com

Stagflation : 

Stagflation When countries experience high levels of both inflation and unemployment then this can be called as Stagflation. www.a2zmba.com