ECN 200: Introduction to Economics Basic Idea of Macroeconomics Nusrat Jahan Lecture-6 Basic Idea of Macroeconomics

The Birth of Macroeconomics In 1930’s John Maynard Keynes first introduced the science of Macroeconomics to understand the economic mechanism that produced Great Depression. Macroeconomics tries to answer some important economic questions- Why do output and employment sometimes fall and how can unemployment be reduced? What are the sources of price inflation and how can it be kept under control? How can a nation increase its rate of economic growth?

Economic interaction among agents in the Economy  The Circular Flow Model It shows how dynamic market creates continuous, repetitive flows of goods and services, resources and money.  Mixed Economy Mixed economy is an economic system in which both the state and the private sector direct the economy.