Principles and Applications of Macroeconomics

Principles and
Applications of
macroeconomics

Table of Contents
INTRODUCTION ..........................................................................................................................3
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................11

INTRODUCTION
There are numerous branches of economics. Macroeconomics is the one, that deals some way in
behaviour of peoples towards market moves in the world across them. It studies economy as a
whole. Macroeconomics involves expenditures done by union or state governments, preparation
of budgets, rate of interest and economic structure of a country. Every nation has to pass various
economic stages that taken into consideration with economic cycles which is depression, boom
and recession. There are always few vital issues in economy which needs to be considered as
soon as possible such as inflation and deflation, it leads to decrease and increase in pricing scale.
GDP can be defined as production of all goods and services manufactured within domestic
boundary of a country during a financial year. Macroeconomics theories or application of these
theories is very helpful for nations because it enables country's proper details for calculating
national income. This report will also highlights ideas for economic welfare and thoughts of
communities. Economic welfare in the economy can be defined as a program that helps in
improving society's condition and ensure equally distribution of wealth with in economy among
population which means distributing scare resources equally to every and utilise them in most
effective and efficient manner(Van den Bergh and Gowdy, 2018). In the report, economic and
monetary challenges that are faced by United Kingdom's government in recent years are mainly
discussed. Each issue that impact functions and operations of country are addressed in report
below, with their suitable solutions that can help government in solving these economic
problems and can improve country's GDP or economic condition. A economy's well-being can
be assessed with surplus in profit margin or additional wealth enhancement made by consumer
and producer both. The term that is used to explain this situation is “Community Excess”.
Surplus in consumer's wealth is explained as increase in his purchasing power
TASK
Definition of Macroeconomic policies and its objectives:-
Economics is a wide concept that is broadly classified into two different categories which are
Microeconomics and Macroeconomics. Microeconomics contains study of demand or supply,
costs, expenses, income, operations and profit generated by these activities at individual level
which affects company at ground level (Mendoza, Razin and Tesar, 2019). Great difference
between micro and macro economics is that micro deals at individual level and macro deals at

aggregate level, that can be determined as operations that are analysed as whole.
Microeconomics helps business in making decisions by understanding behaviour of an individual
but with macroeconomics business can understand behaviour of whole nation that impacts their
decision making at large scale. Companies refer macroeconomic policies and factors to get better
understanding of fluctuations in economy regarding prices of different commodities and price
index. Analysing market and economic condition with view point of macroeconomics is
necessary for business in order to run business operations smoothly. Numerous objectives and
goals which can be achieved through macroeconomics are discussed below:-
 Inflation:- Inflation is described as increase in price index within economy. Situation of
inflation occurs when demand curve shifts upward direction and demand of goods and
services hikes. Although, rise in prices of commodities indicates growth of country's
economy and GDP over a particular time period. Excess of anything is not good. So,
same in case of inflation if rate of inflation raise very high then it can adversely effect
growth of economy and people's wealth which will be a drawback in long term. It
reduces worth of a country's currency and decreases purchasing power of individuals.
Thus, with macroeconomics, countries reach economy's equilibrium level (Zanna and
Berg, 2018) .
 Improvement in living standard:- Citizens of country expects raise in their living
standard, earning, and level of income when country's rate of GDP hikes. Rise in GDP
leads to increase in purchasing power of people which causes increase in demand of
products and services in the market and supply will also increase.
 Level of Equilibrium in balance of payment:- Balance of payment is described as
differentiation between flow of money in economy that is how much amount is inflow
and out flow through trade from country. The three main accounts that is involved in
balance of payment are Capital account, current account and financial account. Different
strategies and plans of macroeconomics helps a country in reaching equilibrium level in
balance of payment (Tweeten, 2018).
 Sustainable economic development:- There are various kinds of microeconomic
indicators available that helps country in evaluating economic changes that occurs in both
positive as well as negative ways. There are sections in economy and balance between
them is necessary, distribution of wealth among each sector equally may eliminate