Basic Issues In Macroeconomics|Macroeconomics

Basic Problems Studied in Macroeconomics - Income InequalityBasic Issues In Macroeconomics | Macroeconomics

Macroeconomics is the branch of economics that deals with the study of aggregate economic variables like aggregate demand, aggregate supply, price level, etc.

Basic Issues in macroeconomics are the economic problems that have often been confronted by different countries at different points of time. It helps to provide sound theoretical framework for investigating causes and effects of economic problem and provides the effective guidelines for finding appropriate policy that measures to solve the economic problem.

1) Unemployment:

Unemployment is the condition in which resources are willing and able to produce goods and services but are not engaged in productive activities. Analysis of unemployment especially labor employment goes hand in hand with the study of macroeconomics that emerged from the Great Depression 1930s.

Types of Unemployment

  • Cyclical Unemployment: This type of unemployment occurs high during recessions and depressions, and low during period of economic growth.
  • Frictional Unemployment: This type of unemployment occurs when workers take some time to move from one job to another job.
  • Seasonal Unemployment: This type of unemployment occurs because the demand for some workers varies widely over the course of the year.
  • Structural Unemployment: This type of unemployment occurs because some labor markets have more workers than the job available. Wages do not decrease to bring the market in equilibrium.

2) Inflation:

Inflation is the persistent increase in average price level in the economy. It is measured by inflation rate ,annual % rate in price index. As inflation rises every dollar you own buys a smaller percentage of a good or service.

3) Business Cycle:

Business Cycle is the fluctuation in economic activity that an economy experiences over a period of time. Business cycle is mainly defined in terms of expansion and recession. During expansion period economy is growing and during recession economy is decreasing.

4) Economic Growth:

Economic growth is attended by increasing the quality or  quantity of the economic resources such as land ,labour,capital and entrepreneurship. The five economic goals are Population growth ,investment, exploration, technological innovation and education. Other economic goals are employment, stability, efficiency and equity.

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