Basic Issues in Macroeconomics || Nature and Scope of Macroeconomics || Bcis Notes

Basic Issues in Macroeconomics 

The basic issues in macroeconomics are described below:

1 Employment and Unemployment :
The major issue in macroeconomics is to explain what determines the level of employment and
national income in the economy. Unemployment refers to involuntary idleness of resources
including the labor.
2 Inflation or Rising General Price Level:
Another macroeconomic issue is to explain and analyze the problem of inflation faced by both developed and developing countries. Inflation refers to a situation of constantly rising prices of commodities and factors of produc¬tion. The opposite situation is known as deflation. During inflation, some people gain and most people lose. So there is a change in the pattern of the income distribution. Therefore, one of the objectives of government policy is to ensure price level stability which implies the absence of inflation and deflation.
3 Business Cycles:
Throughout the history of economics, market economies have experienced what is called business cycles. In boom periods, employment is low but the rate of inflation is high. In periods of depression (or reces¬sion) unemployment is high and the rate of inflation is moderate. In macroeconomics, we study the causes of business cycles and suggest remedial measures.
4 Stagflation and Deflation:
Stagflation is the situation when a high rate of inflation occurs simultaneously with the high rate of unemployment. The existence of a high rate of unemployment means to reduce the level of GNP. It is an important macroeconomics issue of the day the most complex.
5 Economics Growth:
Another important macroeconomics issue is to explain what determines the economic growth in the country. Growth is measured by the annual rate of increase of per capita income. It refers to stimulation when the rate of increase in per capita income exceeds the rate of population growth. There are many theories and models of economic growth that explain how the steady growth of the economy can be achieved.
6 Balance of Payments (BOP) and Exchange Rate:
The balance of payments is a systematic record of all economic transactions between the members of the home country and the rest of the world in an accounting year. These transactions are large, if not entirely, influenced by the exchange rate. It is the rate at which a country’s economy is exchanged for another currency.
The balance of payments is a systematic record of all economic transactions between the members of the home country and the rest of the world in an accounting year. These transactions are large, if not entirely, influenced by the exchange rate. It is the rate at which a country’s economy is exchanged for another currency.

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