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UNISA ECS2602:
MACROECONOMICS
Study Unit: 1
By. E. Ramathuba
,Recap?
• Macroeconomics – a branch of economics where we study the
economy as a whole. In Greek “macro” means large, thus under this
branch we study the behavior of society as whole not individuals.
We look at global economic magnitudes like the total production of
a country, total employment, the inflation rate etc.
• Macroeconomic objectives
• Economists usually distinguish five macroeconomic objectives which
can be used to judge the performance of the economy.
• Economic growth
• Full employment
• Price stability
• Balance of payments stability 2
• Equal distribution of income
, BUSINESS CYCLE
• The business cycle is the pattern of upswing (expansion) and downswing
(contraction) that can be discerned in economic activity over a number of
years.
• From the figure below:, between AB is the period of upswing and BC is a
period of downswing of the economy. The role of macroeconomic policies
(fiscal and monetary policies) is to try reducing the distance between the cycle
and the long-term trend, such that there is less fluctuation in the economy.
However it is important to understand what
causes the fluctuations of the business cycle.
Several economists argued that:
Fluctuations in the growth of economic activity are
temporary, thus could be associated with exogenous
or factors outside the market system.
Others argue that business cycle is endogenous. As
the economy grows, interest rates increase, imports
increase, foreign exchange reserves fall and so on
until the peak is reached.
Others argue that economic fluctuations are caused 3
by various structural external or institutional
changes.
, UNIT1: OVERVIEW
OF SA ECONOMY
4
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