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Economics - Grade - 9 Unit - 7

The document provides an overview of macroeconomics, focusing on its key concepts such as economic growth, unemployment, inflation, interest rates, and government debt. It explains important macroeconomic variables like Gross Domestic Product (GDP) and Gross National Product (GNP), as well as the goals and problems associated with macroeconomic policies. Additionally, it discusses types of inflation, unemployment, and trade balance deficits.

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0% found this document useful (0 votes)
6 views6 pages

Economics - Grade - 9 Unit - 7

The document provides an overview of macroeconomics, focusing on its key concepts such as economic growth, unemployment, inflation, interest rates, and government debt. It explains important macroeconomic variables like Gross Domestic Product (GDP) and Gross National Product (GNP), as well as the goals and problems associated with macroeconomic policies. Additionally, it discusses types of inflation, unemployment, and trade balance deficits.

Uploaded by

nidabarti3
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Economics Grade - 9 Unit - 7 Short Note. prepared by፦ Getacher.

Macroeconomics ፦ deals with the economy as a whole. Macroeconomics (from the Greek prefix
makro-meaning “large”) is a branch of economics dealing with the performance, structure, behavior,
and decision-making of an economy as a whole. For example, using interest rates, taxes, and
government spending to regulate an economy’s growth and stability are the mandates of macroeconomics.
This includes regional, national, and global economies.
❖ Economic Growth: Measured by Gross Domestic Product (GDP), this indicates the total value of
goods and services produced in an economy over a period.
❖ Unemployment: The percentage of the workforce that is unemployed and actively seeking work.
❖ Inflation: The rate at which prices for goods and services increase over
time.
❖ Interest Rates: The cost of borrowing money, which can influence investment and consumption.
❖ Exchange Rates: The value of one currency compared to another, impacting international trade and
investment.
❖ Balance of Payments: A record of a country's economic transactions with the rest of the world.
❖ Government Debt: The total amount of money a government owes to its creditors.
❖ National Income: The total income earned by residents of a country in a given period.
❖ Price Stability: A situation where the general level of prices remains relatively constant.
❖ Employment: The number of people who are employed.
❖ Monetary Policy: Actions taken by a central bank to influence the money supply and interest rates.
❖ Fiscal Policy: Government policies related to taxation and spending.
1. The study of the structure and performance of national economies and of the policies that
governments use to try to affect economic performance is_________
A. Microeconomics C. Business cycle
B. Macroeconomics D. Economic development

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7.1 Definition of Macroeconomics variables
Macroeconomics is the study of economic behavior and policies that influence consumption and investment,
trade balance, and other determinants of various macroeconomic variables.
Gross Domestic Product (GDP)
It is the total value of currently produced final goods and services that are produced within a country’s
boundary during a given period of time, usually one year.
In order to understand the meaning of GDP, note the following points:
➢ it measures the current production only.
➢ It takes into account final goods and services only (only the end products of various production
processes) or we do not include the intermediate products in our GDP calculations. I.e., intermediate goods are
goods that are completely used up in the production of other products in the same period that they themselves
are produced.
➢It measures the value of final goods and services produced within the boundaries/territory of a
country, irrespective of who produces them.
In measuring it, we take the market values of goods and services (GDP =∑ QxP ) Where Pi denotes the prices
of outputs produced in various sectors of an economy over a given time period.
Q i= the quantity of various final goods and services produced in an economy
Gross National Product (GNP)
➢The total value of goods and services produced by domestically owned factors of production in a given
time period (usually one year), regardless of their geographical location.
GDP +NFI = GNP
Where NFI denotes Net Factor Income from Foreign Sources On the other hand, NFI =(factor income received
from abroad by a country’s citizens) – (factor income paid for foreigners abroad).
The net financial impact (NFI could be negative, positive, or zero depending on the amount of factor income
received by the two parties.
When NFI > 0 , Then GNP > GDP
NFI < 0 , Then GNP < GDP
NFI =0 , Then GNP =GDP
7.2 Macroeconomics Goals
The general objectives of a macroeconomic policy are to achieve:
➢Economic growth is defined as a consistent increase in national income.

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➢Full employment means the maximum possible utilization of factors of production in the
production process.
➢Stable balance of payment: It is the statistical record of all economic transactions between domestic
residents and the rest of the world that attains equilibrium.
➢Price stability: it is the stable level of prices in the economy that avoids long periods of inflation or deflation
and sustains the value of money over time. Price level stability is important for savers. ➢Fair distribution of
income and wealth
7.3 Macroeconomics problems
➢There are often fluctuations in the level of economic activity.
➢ At times, the economy finds itself in the grip of a recession when levels of national income, output, and
employment are far below their full potential levels.
1. Inflation
➢Inflation, in general terms, is described as a situation characterized by a sustained
increase in the general price level. It may be noted thus:
➢A small rise in prices or an irregular price rise cannot be called inflation. It is a persistent and
appreciable rise in prices which is called inflation.
➢During inflation, all costs and prices do not rise together and in the same proportion. It is an
increase in the general level of prices measured by a price index, which is an average of
consumer or producer prices.
Inflation occurs when the prices of goods and services rise, while deflation occurs when those prices decrease.
Deflation refers to a decrease in the general price level of goods and services in an economy.
The balance between these two economic conditions, opposite sides of the same coin, is delicate, and an
economy can quickly fluctuate from one condition to the other.
Causes of inflation
➢Increase the money supply.
➢ An increase in the input costs
➢Imported inflation
➢ Weaker exchange rate
➢ Decline in productivity

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1. What is the definition of inflation?
A. A regular and continuous rise in the general price level
B. A regular and continuous fall in the general price level
C. . A regular and continuous change in the general price level
D. All of the above
Types of inflation
Depending upon the specific causes, two types of inflation have been distinguished:
1. Demand –pull inflation
2. Cost-push inflation

1.Demand-pull inflation results from an increase in aggregate demand when the economy is producing at or
near full capacity. This demand is growing faster than the economy’s productive capacity at full employment.
This is a situation where “too much money” chases “too few goods.” This is an example of a situation in which
the primary factor at work is an increase in aggregate demand for output, whether from the government,
entrepreneurs, or households. The result is that the pressure of demand is such that it cannot be met by the
currently available supply of output.
2.Cost push, also known as supply-side inflation, occurs as a result of a continuous decline in aggregate
supply. This may be due to bad weather, an increase in wages, or the prices of other inputs. Setbacks in
agricultural and industrial production due to various reasons—shortages of raw materials, power breakdowns,
strikes and lockouts, bad weather conditions, increases in input prices, etc.—lead to a decreased supply of
goods in comparison to their demand, which further leads to price rises

1. Which of the following is a demand-pull factor of inflation?

A) Increased production costs C) Supply chain disruptions

B) Higher consumer spending D) Technological advancements

2. Unemployment

➢Unemployment is a term referring to individuals who are employable and actively seeking a job
but is unable to find a job.
➢Included in this group are those people in the workforce who are working but do not have an
appropriate job.
➢The labor force consists of all those who are fit for work and are willing and available to work.

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➢The labor force includes groups of people within a specified age bracket (15–64) who are
actually employed and those who are without a job but are actively searching for a job.
➢The labor force is made up of both employed and unemployed people.
➢Unemployment, therefore, refers to that portion of the labor force that is without a job but is
actively searching for one.
Thus, for a person to be categorized as unemployed, two conditions must be fulfilled
✓That the person is without a job and able to work
✓The person wants to have a job and is willing to work at the current market wage,
Types of unemployment
1. Frictional unemployment refers to a brief period of unemployment experienced by people due to
✓Seasonality of work, e.g., construction workers
✓Voluntary switching of jobs in search of better jobs
✓Entrance to the labor force, e.g., a student immediately after graduation
✓Re-entering the labor force
2. Structural unemployment results from a mismatch between the skills or locations of job seekers and
the requirements or locations of the vacancies.
➢It refers to a situation in which workers become jobless due to a loss of demand in particular regions or
industries.
For example, if an agricultural graduate is looking for a job at a construction site. Thus, unemployment
that arises due to a change in the pattern of demand, leading to changes in the structure of production in
the economy, is called “structural unemployment.” Structural unemployment signifies a mismatch
between the supply and demand for labor.
3. Cyclical unemployment is generated due to the absence of vacancies.
This usually happens due to a deficiency in demand for commodities.
Thus, unemployment that arises due to inadequate overall demand associated with the downswing,
recession, or depression period of a trade cycle is called “cyclical unemployment.

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Activity
1. What type of unemployment might occur during a technological shift?

A. Frictional B. Seasonal C. Cyclical D. Structural

2. Which type of unemployment occurs when workers are temporarily laid off?

A. Seasonal unemployment C. Structural unemployment

B. Frictional unemployment D. Cyclical unemployment

3. What is the main difference between frictional and seasonal unemployment?

A. Frictional is temporary; seasonal is permanent

B. Frictional is due to skill mismatch; seasonal is due to weather

C. Frictional occurs during recessions; seasonal occurs at specific times

D. Frictional is voluntary; seasonal is mandatory

Trade Balance Deficit


✓The trade balance is sometimes referred to as the visible balance because it represents the difference
between receipts for exports of goods and expenditure on imports of goods which can be visibly seen crossing
frontiers.
Trade Balance = Receipts for exported goods – Payments on imported goods
When the trade balance is in surplus this means that a country has earned more from its exports of goods than
while disequilibrium means that the condition is either deficit or surplus.
A deficit in balance of trade occurs when the total receipts are exceeded by total payments; it has paid
for its imports of goods.
Balance of Payments Deficit
✓The balance of payments is a statistical record of all the economic transactions between residents of the
reporting country and residents of the rest of the world during a given time period.

1. What is a trade balance deficit?

A. When exports exceed imports C. A balanced trade situation

B. When imports exceed exports D. None of the above

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