Objectives of Macroeconomics

1477 Words Oct 25th, 2012 6 Pages
Introduction to Macroeconomics

Chapter 1
Introduction to Macroeconomics
1.1 INTRODUCTION









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
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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.

1.3 OBJECTIVES OF ISLAMIC MACROECONOMICS.
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

(a)
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