MICROECONOMICS AND MACROECONOMICS

THE MAJOR DIVISIONS OF ECONOMICS The major divisions of economics include microeconomics and macroeconomics. Another branch, development economics, investigates the history and changes of economic activity and organisation over a period of time, as well as their relation to other activities and institutions. Within these three major divisions there are specialised areas of study that attempt to answer questions on a broad spectrum of human economic activity, including public finance, money supply and banking, international trade, labour, industrial organisation, and agriculture.

MICROECONOMICS str. 1 As its name implies microeconomics deals with the micro aspects of economics, concerning choices. It considers questions such as: how is it decided, and how should it be decided, what enterprises should operate; what goods and service should be produced; what techniques of production should be used; at what prices should goods be sold; and how should incomes be distributed amongst the members of a society.

MICROECONOMICS str. 2 It considers individuals both as suppliers of labour and capital and as the ultimate consumers of the final product, and it analyses firms both as suppliers of products and as consumers of labour and capital. Microeconomics seeks to analyse the market or other type of mechanism that establishes relative prices among goods and services – the price of tomato versus hot dog.

MACROECONOMICS _str. 1 A British economist, John Maynard Keynes is largely responsible for the creation of modern macroeconomics. As its name implies it deals with the macro aspects of economics, concerning the determination of broad aggregates. This considers what determines full employment and production, consumption, investment, and how much a country imports or exports. It also asks what causes booms and slumps in the short run, and what determines the long-term growth rate of the economy, the general level of prices and the rate of inflation.

MACROECONOMICS _str. 2 Macroeconomics considers how these matters can and should be influenced by government through monetary and fiscal policies. Fiscal policy relates to taxes and expenditures, monetary policy to financial markets and the supply of credit, money, and other financial assets.

A SHARED SET OF GOALS: FULL EMPLOYMENT, PRICE STABILITY AND ECONOMIC GROWTH _str. 1 However, consistent throughout macroeconomics is a shared set of goals: full employment, price stability and economic growth. Full employment is a situation when every worker available for employment has a job. It is very unlikely that this can ever be achieved. When economists talk about full employment, they normally mean fairly full employment. However, for obvious reasons, it is one of the primary goals of any economic society: the more fully resources are employed, the greater the levels of output of goods and services, and the higher the prosperity.

A SHARED SET OF GOALS: FULL EMPLOYMENT, PRICE STABILITY AND ECONOMIC GROWTH _str. 2 Price stability is the absence of inflation or deflation in the overall level prices. Inflation is a persistent tendency for prices and money wages to increase. The rise in prices resulting from an increase in demand for goods and services may be connected with an increase in money supplies. It is measured by the proportional changes over time in some appropriate price index, commonly a consumer price index or GDP deflator, the gross domestic product being the annual total value of goods produced and service provided by a country.

A SHARED SET OF GOALS: FULL EMPLOYMENT, PRICE STABILITY AND ECONOMIC GROWTH _str. 3 Even when the rate of inflation stands at relatively modest levels it can pose problems for the economy. Real income is the quantity of goods and services that can be bought with an individual’s nominal or money income, i.e., the real purchasing power of one’s nominal income. When prices of the goods and services rise, and people’s nominal incomes remain the same or do not rise as fast as prices, the real income of these consumers falls.

A SHARED SET OF GOALS: FULL EMPLOYMENT, PRICE STABILITY AND ECONOMIC GROWTH _str. 4 Economic growth is the rate of increase of the money received by a country from industry and trade, which term is generally applied to developed economies. Economic growth is measured by dividing the gross national product by the number of people in the country, where GNP stands for the annual total value of goods produced and services provided by a country, plus the total income from abroad.

THE OVERALL GOAL OF MACROECONOMICS POLICY Economic stabilisation is the overall goal of macroeconomics policy. Economic stability means the achievement of full employment under the inflationless or nearly inflationless conditions to attain economic growth in the present and future.

Unit Summary _str. 1 This unit has been about the terms, concepts and definitions of microeconomics and macroeconomics. Here are the key points from this unit. Development economics investigates the history and changes of economic activity and organisation over a period of time, as well as their relation to other activities and institutions. Economic growth is the rate of increase of the money received by a country from industry and trade. Economic stability means the achievement of full employment under the inflationless or nearly inflationless conditions to attain economic growth in the present and future. Fiscal policy relates to taxes and expenditures. Full employment is a situation when every worker available for employment has a job.

Unit Summary _str. 2 GDP - gross domestic product is the annual total value of goods produced and service provided by a country. GNP - gross national product is the annual total value of goods produced and services provided by a country, plus the total income from abroad. Inflation is a persistent tendency for prices and money wages to increase. Macroeconomics deals with the macro aspects of economics, considering what determines full employment and production, consumption, investment, and how much a country imports or exports, and asking what determines the long-term growth rate of the economy, the general level of prices and the rate of inflation.

Unit Summary _str. 3 Microeconomics deals with the micro aspects of economics, considering individuals both as suppliers of labour and capital and as the ultimate consumers of the final product, and analysing firms both as suppliers of products and as consumers of labour and capital. Monetary policy refers to financial markets and the supply of credit, money, and other financial assets. Price stability is the absence of inflation or deflation in the overall level prices. Real income is the real purchasing power of one’s nominal income.

GRAMATIKA

WORD FORMATION: ADJECTIVES When an adjective is formed by the close combination of two elements, the second of which is usually an adjective, it is called a compound adjective. The first element may be: (i) a noun – airsick; (ii) an adjective – red-hot; (iii) an adverb – overdue. Compound adjectives with self- being the first part are very frequent as well: self-evident. There are also compound adjectives that are made with present participles (e.g. long-lasting) and past participles or adjectives ending in –ed: (a hand-blown, hard-boiled). The latter are more common though. Compound adjectives made with present participles have an active meaning, the ones made with past participles and adjectives ending in –ed have a passive meaning.

THE FUTURE TENSE _str. 1 The Future Tense is used to express: (a) The speaker’s opinions, assumptions, etc. about the future. E.g. (I suppose) they’ll move abroad. (I think) our books will sell well on the market. (b) A decision made at the time of speaking: E.g. Have you ordered the books? No. I’ll do it now. Future habitual actions which we assume will take place: E.g. Spring will come again. However, the Future Tense is not the only way of expressing the future. As has already been mentioned the Present Simple can also be used for a planned future action (E.g. We leave Belgrade at six and arrive in Subotica at eight.), as well as the Present Continuous for a definite future engagement (E.g. He is going to the theatre tonight.).

THE FUTURE TENSE _str. 2 Some other methods of expressing the future include: (a) The going to form expresses the intention to perform a certain future action. Actions expressed by the going to form are usually considered very likely to be performed, though there is not the same idea of definite future engagement that we get from the present continuous. E.g. We are going to launch our new product in May. (b) The Future Continuous Tense is used to express a future without intention. In contrast to the present continuous tense which implies a deliberate action, the future continuous tense usually implies an action which will occur in the normal course of events. E.g. Marry is meeting Tim tomorrow. (Mary has deliberately arranged the meeting tomorrow) Mary’ll be meeting Tim tomorrow. (they will meet in the ordinary course of events, i.e. perhaps they work together)