ABM-Module: A- Micro and Macro Economics
Microeconomics
1. Micro economics is a branch of economics that studies how households and firms make decisions to allocate limited resources, typically in markets where goods or services are being bought and sold.
2. Microeconomics examines how these decisions and behaviours affect and supply and demand for goods and services, which determines prices; and how prices, in turn, determine the supply and demand for goods and services.
3. Microeconbmics analyses the market behavior of individual consumers and firms in an attempt to understand the decision-making process of firms and households.
Macroeconomics:
1. Macro economics is concerned with the overall performance of the economy.
2. Macroeconomics did not exist in its modern form until 1936, when John Maynard Kaynes published his revolutionary book titled General Theory of Employment, Interest and Money.
3. In his new theory, Keynes developed an analysis of what causes business cycles, with alternating spells of high unemployment and high inflation.
4. Macroeconomics examines a wide variety of areas, such as how total investment and consumption are determined, how central banks manage money and interest rates, what cause international financial crises, and why some nations grow rapidly while others stagnate.
5. Macroeconomics is a branch of Economics that deals with the performance, structure and behavior of a national or regional economy as a whole.
6. It is the study of the behavior and decision-making of entire economies.
7. Macroeconomists study aggregated indicators such as GDP, unemployment rates and price indices to understand how the whole economy functions.
8. Macroeconomists develop models that explain the relationship among such factors as national income, output, consumption, unemployment, inflation, saving, investment, international trade and international finance.
9. Microeconomics is primarily focused on the actions of individual agents, such as firms and consumers, and how their behavior determines prices and quantities in specific markets.
TYPES OF ECONOMIES
Three fundamental problems faced by any economy: what commodities are produced, how these goods are made, and for whom they are produced.
1. A society must determine how much of each of the many possible goods and services it will make and when they will be produced.
2. How are goods produced?: A society must determine who will do the production, with what resources, and what production techniques they will use.
3. For whom are goods produced? Who gets to eat the fruit of economic activity? Is the distribution of income and wealth fair and equitable? How is the national product divided among different households? Are many people poor and a few rich? Do high incomes go to teachers or athletes or auto workers or venture capitalists? Will society provide minimal consumption to the poor or must people work if they are to eat?
MARKET, COMMAND, AND MIXED ECONOMIES: There are basically two ways of organizing an economy. In the first method, government makes most economic decisions, with people on top of the hierarchy giving economic commands to those further down the ladder. In the second method, decisions are made in markets, where individuals or enterprises voluntarily agree to exchange goods and services, usually through payments of money.
Market Economy/Capitalistic Economy:
1. in major parts of the world, and in the United States, there is concept of market economy.
2. A market economy is one in which individuals and private firms make the major decisions about production and consumption.
3. A system or prices, of markets, of profits and losses, of incentives and rewards determines what, how, and for whom.
4. Firms produce the commodities that yield the highest profits (the what) by the techniques of production that are least costly (the how).
5. Consumption is determined by individuals' decisions about how to spend the wages and property incomes, generated by their labour and property ownership (for whom).
6. The extreme case of a market economy, in which the government does not interface in economic decisions, is called a laissez-faire' economy.
Socialistic Economy/Command Economy:
1. A command economy is one in which the government makes all important decisions about production and distribution.
2. In a command economy, the government owns most of the means of production (land and capital); it also owns and directs the operations of enterprises in most industries; it is the employer of most workers and tells them how to do their jobs; and it decides how the output of the society is to be divided among different goods and services.
3. In short, in a command economy, the government addresses major economic questions by virtue of its ownership of resources and its power to enforce decisions.
Mixed Economy:
1. No contemporary society or economy falls completely into either of these extreme categories. Rather, all societies are mixed economies, with elements of both market and command economies. There has never been a 100% market economy.
2. Today most decisions in the United States are made in the marketplace. But the government plays an important role in overseeing the functioning of the market; government passes laws that regulate economic life, produce goods and services, and control pollution. Most societies/nations today operate as mixed economies.
3. India, right from the beginning of its economic planning, has been a mixed economy where public sector, private sector and joint coexist and complement each other.
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ADVANCED BANK MANAGEMENT
1. Micro economics is a branch of economics that studies how households and firms make decisions to allocate limited resources, typically in markets where goods or services are being bought and sold.
2. Microeconomics examines how these decisions and behaviours affect and supply and demand for goods and services, which determines prices; and how prices, in turn, determine the supply and demand for goods and services.
3. Microeconbmics analyses the market behavior of individual consumers and firms in an attempt to understand the decision-making process of firms and households.
Macroeconomics:
1. Macro economics is concerned with the overall performance of the economy.
2. Macroeconomics did not exist in its modern form until 1936, when John Maynard Kaynes published his revolutionary book titled General Theory of Employment, Interest and Money.
3. In his new theory, Keynes developed an analysis of what causes business cycles, with alternating spells of high unemployment and high inflation.
4. Macroeconomics examines a wide variety of areas, such as how total investment and consumption are determined, how central banks manage money and interest rates, what cause international financial crises, and why some nations grow rapidly while others stagnate.
5. Macroeconomics is a branch of Economics that deals with the performance, structure and behavior of a national or regional economy as a whole.
6. It is the study of the behavior and decision-making of entire economies.
7. Macroeconomists study aggregated indicators such as GDP, unemployment rates and price indices to understand how the whole economy functions.
8. Macroeconomists develop models that explain the relationship among such factors as national income, output, consumption, unemployment, inflation, saving, investment, international trade and international finance.
9. Microeconomics is primarily focused on the actions of individual agents, such as firms and consumers, and how their behavior determines prices and quantities in specific markets.
TYPES OF ECONOMIES
Three fundamental problems faced by any economy: what commodities are produced, how these goods are made, and for whom they are produced.
1. A society must determine how much of each of the many possible goods and services it will make and when they will be produced.
2. How are goods produced?: A society must determine who will do the production, with what resources, and what production techniques they will use.
3. For whom are goods produced? Who gets to eat the fruit of economic activity? Is the distribution of income and wealth fair and equitable? How is the national product divided among different households? Are many people poor and a few rich? Do high incomes go to teachers or athletes or auto workers or venture capitalists? Will society provide minimal consumption to the poor or must people work if they are to eat?
MARKET, COMMAND, AND MIXED ECONOMIES: There are basically two ways of organizing an economy. In the first method, government makes most economic decisions, with people on top of the hierarchy giving economic commands to those further down the ladder. In the second method, decisions are made in markets, where individuals or enterprises voluntarily agree to exchange goods and services, usually through payments of money.
Market Economy/Capitalistic Economy:
1. in major parts of the world, and in the United States, there is concept of market economy.
2. A market economy is one in which individuals and private firms make the major decisions about production and consumption.
3. A system or prices, of markets, of profits and losses, of incentives and rewards determines what, how, and for whom.
4. Firms produce the commodities that yield the highest profits (the what) by the techniques of production that are least costly (the how).
5. Consumption is determined by individuals' decisions about how to spend the wages and property incomes, generated by their labour and property ownership (for whom).
6. The extreme case of a market economy, in which the government does not interface in economic decisions, is called a laissez-faire' economy.
Socialistic Economy/Command Economy:
1. A command economy is one in which the government makes all important decisions about production and distribution.
2. In a command economy, the government owns most of the means of production (land and capital); it also owns and directs the operations of enterprises in most industries; it is the employer of most workers and tells them how to do their jobs; and it decides how the output of the society is to be divided among different goods and services.
3. In short, in a command economy, the government addresses major economic questions by virtue of its ownership of resources and its power to enforce decisions.
Mixed Economy:
1. No contemporary society or economy falls completely into either of these extreme categories. Rather, all societies are mixed economies, with elements of both market and command economies. There has never been a 100% market economy.
2. Today most decisions in the United States are made in the marketplace. But the government plays an important role in overseeing the functioning of the market; government passes laws that regulate economic life, produce goods and services, and control pollution. Most societies/nations today operate as mixed economies.
3. India, right from the beginning of its economic planning, has been a mixed economy where public sector, private sector and joint coexist and complement each other.
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ADVANCED BANK MANAGEMENT
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