The paper has dealt with some essential concepts of economics like the circular flow of income and the inner flow of income. Various elements like injections into the markets and the leakages of the market have also been discussed. …
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Recognition of the relationship of withdrawals and injections has also been made which allows better overview of the markets. The relationship of withdrawal and injections has shown an indirect link similar to the savings and investments, taxation and government expenditures. The last and most essentials element of this paper is the discussion of the circular flow of income and the four macroeconomic objectives i.e. a) Economic Growth, b) Reduced Unemployment, c) Rise of Inflation, and d) Deterioration of Balance of Payments.
The figure below provides a view on the relationship of the four main objectives of macroeconomics. The figure shows how in a short term the four objectives, i.e. faster growth of output, lower unemployment, lower inflation and the avoidance of balance of payments deficits are related to each other (Sloman and Sutcliffe). The relationship depends on the aggregate demand which is influenced by each phase of the business.
a) Expansionary Phase: In this phase (phase 2), the aggregate demand grows very rapidly and the gap between the potential output and actual output is relatively narrower. Here the growth in the output will be relatively rapid and the levels of unemployment will be faced with a drop as well. This provides a solution for two issues however it leads to the other two sectors to be faced with issues (Sloman and Sutcliffe). With the higher levels of shortages the inflation is also affected and this leads to the deteriorating balance of payments which in turn leads to the domestic goods being less competitive in the international markets.
b) Peak: At phase three of the cycle i.e. the peak phase, the level of unemployment is at the lowest and the output of the company is at the highest level.
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And what do the commensurate fiscal policies do to the economy? GDP is different from GNP. GDP is the domestic product: It is all the things and services that were produced domestically, no matter who owned them, even if it was foreign buyers.
In order to achieve the objective or aim of this discussion, the paper uses questions and answers method with respect to the March 2012 budget. Questions and Answers 1. What is the macroeconomic situation? Despite the long span of economic stability, the financial crisis or 2008 and 2009 exposed an unbalanced as well as unstable economic growth in the United Kingdom.
Macroeconomics has critical elements, which include price stability, equilibrium in balance of payment, economic growth, and employment. It is the central role of any government to ensure that the economy of the country is which it is run has favorable economic policies by use of various fiscal or monetary policies.
Unlike in the primitive societies that existed during the birth of economic thought, the modern economy shows instant changes with yesterday conditions being fully different from today’s economic environment. This calls for well thought economic policies otherwise the economy would stump to serious and unsolvable problems in the future.
The Economists Dictionary of Economics describes Macroeconomics as "The study of whole economic systems aggregating over the functioning of individual economic units. It is primarily concerned with variables which follow systematic and predictable
Fiscal and monetary policies have been examined as control measures for the economic recession. Some leading economic indicators such as: unemployment rate, labor cost index, commodity prices, change in business inventories and work productivity that predict the future health of economy have also been explored in the paper.
ver, poverty takes away people’s peace of mind, dignity, freedom, and rights, while also putting their lives danger and depriving them of a stable future (Whitman, 2011: p52). As a result, poverty reduction especially in developing nations has become increasingly important to