Objectives of Macroeconomics

1486 Words Nov 3rd, 2012 6 Pages
Introduction to Macroeconomics

Chapter 1
Introduction to Macroeconomics

Economics is divided into two main branches: microeconomics and macroeconomics.
Macro means large, and micro means small.
Microeconomics takes a close-up view of the economy by concentrating on the
choices made by individual participants in the economy such as consumers, workers,
business managers and investors.
Microeconomics stresses on the role of prices in business and personal decisions. One
of its major goals is to understand how prices of particular goods and services are
determined and how prices influence decisions. Because of this reason,
microeconomics is sometimes called price theory.
Macroeconomics looks at the economy from
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The cycle of booms and recessions is known as the trade cycle or
business cycle.

(d) To Achieve Equilibrium in Foreign Sector

A country will try to get an overall surplus balance of payment (more money coming
in than money going out). If we have a deficit, this means that the country will have
to borrow from abroad or attract deposits from abroad. This results in paying high
interest rates and increasing country’s debt.

Macroeconomics tries to understand what determines the scale and balance of our
international economics transactions – our international balance of payments.

(e) Equitable Distribution of Income

Most countries/government seeks to narrow the range of the size distribution of
income, reducing the incomes of those at the upper end and raising the incomes of
those at the lower end. Methods to change the size distribution of income are:
• Tax policy
- The most effective is progressive taxation.
• Expenditure policy
- This includes subsidies, transfer payment and educational scheme. The
benefits received tend to vary with income. Many transfer payments
benefit lower income group. Other expenditures such as higher education
tend mainly to benefit middle-income groups.

In an Islamic economic system, the basic policy objectives are:

To achieve social justice and distribution of income and wealth
Universal education
To achieve optimal rate of economic growth
To maximize employment generation