ECO 220

Intro to macroeconomy Monday,July 12,2010 11:38 PM

Microeconomyvsmacroeconomy

Microeconomy= Studies individual economics unit such as household, firms and government

Macroeconomy= Studies the aggregate behaviorof the entire Aggregate=the sub total of  behavioroff al individualin the economy

Macroeconomicsgoals Elements of the macroeconomy Government policies Microeconomics goals from Islamicperspective

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Social justice Is defined as the minimum standard of  living guaranteedby the Islamicstate Social justice can be attain by ○ Satisfaction of basicneed ○ Implementof zakat ○ Removal sources of hardship and discomfort ○ Improvementof life quality by morally and materially

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Balance between the needs of  the individualand society Islam perceivesthe needs of  the personal rights if an individual When conflict arrives between society and individual,the society is given more attention than individual needs

Monetary policy -the tools used by the gov through central bank to control the supply of money expenditure -used to maintain the overall price level, to achievehigher economics growth, remove fluctuation

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Optimum rate of economic growth The ribais prohibited has become very limited The divine guidance,al-Quran will guide the Muslimsto realize this objective Several strategies to achieve economicgrowth ○ Appropriate allocation of  material resources ○ Equitable distribution of  income and wealth

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Full and efficient employment of human resources Government needsto give educational opportunitiesand vocational training Government must monitorthe monetary rewards in accordance of theirwork

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Expansionary monetary Curb recession Increase amount of money

Contractionary monetary Curb inflation Money supply reduced

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Fiscal policy Policy concerningtaxes and expenditure. Purposes-to stabilizeeconomy, Tax from h/hold and firm will be used to publicexpenditure

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Contactionary fiscal - Bringeconomy outof inflation by increasingtaxes and decreasing governmentexpenditure-slowsdown growth

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Price stability To keep its inflation rate as low as possible Inflation occur when the overall price increase Inflation is based average price Inflation can reduce the purchasing powerof consumer. >>inflation high, g&s purchased decreased.

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Full employment Economy should use all its available resources more efficientlyto attain maximum output Consequences-economics loss to the society ,loss of self respect, Maximumemployment-less4/6%

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Equitable distribution of income Disparities willcreate socialfriction Taxation is away to equalize The use of expenditure/fiscalpolicy

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Economicgrowth Economy must operate in full capacity=increase in full production level There are4phases- peaks, recession, trough, recovery Is measured by full production unit percapita

Household Own all the factors of production Provide serviceof f.o.d to gov and firm Receive payment in term of rent, wages, interest and profit

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Expansionary fiscal -to getoutof recession -reducingtaxes, increasinggov expenditure -more income, more consumption

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Rest of the world The foreign sectors Import and export goods

Government Collects tax from ] h/hold and firm Provide development and operationalpurposes Buys F.O.Dfrom h/hold

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Firms Buy F.O. h/hold t and sells Provide and h/h P ay sw a and inter h/hold a Receive from sal

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d from o produce s good g&s to gov old ges, rent, restto nd gov revenue e