BUSINESS CYCLES
BUSINESS CYCLES
The business cycles or the irregular expansions and contractions in economics activity-Samuelson"trade cycle refers a period of parity followed by a period of depressions".
Business cycle or trade is a part of the capitalist system ,it refers to the phenomenon of cyclical booms and depressions ,in a business cycles there are wave -like fluctuations in aggregates employments,incomes ,output and prices level,the term business cycles has been defined in various ways be differents economics .The business cycles in the generals sense may be defined as an alternations of periods of prosperity and depression of good and bad trade".similarly"a trade cycles is composed of periods of good trade characterized by rising prices and low unemployments percentages ,altering with periods of bad trade characterized by falling prices and high unemployments percentages".
An important points to be noted in the case of business cycles is that "no cycle is perfectly regular with uniform frequency and amplitude ,that is the time taken to move from one peak level of output to the next would always be the same and the level of out put and employments would always vary in the same proportions between the upper and lower turning -points ,but such cycles have never occured."thus business cycles are recurrent fluctuations in aggregate employments ,income ,output and prices level.
The business cycles or the irregular expansions and contractions in economics activity-Samuelson"trade cycle refers a period of parity followed by a period of depressions".
Business cycle or trade is a part of the capitalist system ,it refers to the phenomenon of cyclical booms and depressions ,in a business cycles there are wave -like fluctuations in aggregates employments,incomes ,output and prices level,the term business cycles has been defined in various ways be differents economics .The business cycles in the generals sense may be defined as an alternations of periods of prosperity and depression of good and bad trade".similarly"a trade cycles is composed of periods of good trade characterized by rising prices and low unemployments percentages ,altering with periods of bad trade characterized by falling prices and high unemployments percentages".
An important points to be noted in the case of business cycles is that "no cycle is perfectly regular with uniform frequency and amplitude ,that is the time taken to move from one peak level of output to the next would always be the same and the level of out put and employments would always vary in the same proportions between the upper and lower turning -points ,but such cycles have never occured."thus business cycles are recurrent fluctuations in aggregate employments ,income ,output and prices level.
LIMITATIONS OF MICROECONOMICS
LIMITATIONS OF MICROECONOMICS
STATISTICAL AND CONCEPTUAL S DIFFICULTIES:
The measurements of macro economics concepts involves a no. of statistical and conceptual difficulties ,these problems relate to the aggregations of microeconomics variables,if individuals units are almost similar,aggregations does not presents much difficulty ,but if microeconomics variables relate to dis similar individuals units,their aggregation into one macroeconomics variable may be wrong and dangerous.
STATISTICAL AND CONCEPTUAL S DIFFICULTIES:
The measurements of macro economics concepts involves a no. of statistical and conceptual difficulties ,these problems relate to the aggregations of microeconomics variables,if individuals units are almost similar,aggregations does not presents much difficulty ,but if microeconomics variables relate to dis similar individuals units,their aggregation into one macroeconomics variable may be wrong and dangerous.
LIMITATIONS OF MICROECONOMICS
LIMITATIONS OF MICROECONOMICS
INDISCRIMINATE USE OF MACROECONOMICS MISLEADING:
An indiscriminate and uncritical use of macroeconomics in analyzing the problems of the real world can often be misleading ,for instance ,if the policy measures needed to achieve and maintain full employments int he economy are applied to structural unemployment in individuals firms and industries ,they becomes irrelevant,similarly ,measures aimed at controlling general prices cannot be applied with much advantages for controlling general prices cannot be applied with much advantages for controlling prices of individuals products.
INDISCRIMINATE USE OF MACROECONOMICS MISLEADING:
An indiscriminate and uncritical use of macroeconomics in analyzing the problems of the real world can often be misleading ,for instance ,if the policy measures needed to achieve and maintain full employments int he economy are applied to structural unemployment in individuals firms and industries ,they becomes irrelevant,similarly ,measures aimed at controlling general prices cannot be applied with much advantages for controlling general prices cannot be applied with much advantages for controlling prices of individuals products.
LIMITATIONS OF MICROECONOMICS
LIMITATIONS OF MICROECONOMICS
AGGREGATE VARIABLES MAY NOT BE IMPORTANT NECESSARILY:
The aggregate variables which form the economics systems may not be of much significances,for instance,the national income of a country is the total of all individuals incomes ,a rise in national incomes does not mean that individuals incomes have risen,the increases in national incomes mights be the results of the increase in the incomes of a few rich peoples in the country ,thus a rise in the national incomes of this types has little's significance from the points of view of the community.pro.boulding call these three difficultities as macroeconomics paradoxes"which are true when applied to a single individuals but which are untrue when applied to the economics systems as a whole.
AGGREGATE VARIABLES MAY NOT BE IMPORTANT NECESSARILY:
The aggregate variables which form the economics systems may not be of much significances,for instance,the national income of a country is the total of all individuals incomes ,a rise in national incomes does not mean that individuals incomes have risen,the increases in national incomes mights be the results of the increase in the incomes of a few rich peoples in the country ,thus a rise in the national incomes of this types has little's significance from the points of view of the community.pro.boulding call these three difficultities as macroeconomics paradoxes"which are true when applied to a single individuals but which are untrue when applied to the economics systems as a whole.
LIMITATIONS OF MICROECONOMICS
LIMITATIONS OF MICROECONOMICS
TO REGARD THE AGGREGATES AS HOMOGENEOUS:
The main defect in macro analysis is that it regards the aggregates as homogeneous without caring about their internal compositions and structures,the averages wage in a country is the sum total of wages in all occupations,ex. wage of clerks,typists,teachers,nurses,etc. but the volume of aggregate employments depends on the relative structures of wages rather than on the everage wage ,if for instance,wages of nurses increases but of typists fall,the averages may remain unchanged ,but if the employments of nurses fallss a little and of typists rises much ,aggregate employments would increases.
TO REGARD THE AGGREGATES AS HOMOGENEOUS:
The main defect in macro analysis is that it regards the aggregates as homogeneous without caring about their internal compositions and structures,the averages wage in a country is the sum total of wages in all occupations,ex. wage of clerks,typists,teachers,nurses,etc. but the volume of aggregate employments depends on the relative structures of wages rather than on the everage wage ,if for instance,wages of nurses increases but of typists fall,the averages may remain unchanged ,but if the employments of nurses fallss a little and of typists rises much ,aggregate employments would increases.
LIMITATIONS OF MICROECONOMICS
LIMITATIONS OF MICROECONOMICS
There are ,however certain limitations of microeconomics analysis mostly ,these stem from attempts to yield macroeconomics generalizations from individuals experiences.
FALLACY OF COMPOSITIONS:
In macroeconomics analysis the "fallacy of compositions "is involved ex. aggregate economic behaviors is the sum total of individuals activities ,but what is true of individuals is not necessarily true of the economy as a whole ,for instance,savings are a private virtue but a public vice,if total savings in the economy increase,they may initiate a depressions unless they are invested again,if an individuals depositor withdraws his money from the bank there is no danger;but if all depositors do this simultaneously ,there will be a run on the banking system will be adversely affected.
There are ,however certain limitations of microeconomics analysis mostly ,these stem from attempts to yield macroeconomics generalizations from individuals experiences.
FALLACY OF COMPOSITIONS:
In macroeconomics analysis the "fallacy of compositions "is involved ex. aggregate economic behaviors is the sum total of individuals activities ,but what is true of individuals is not necessarily true of the economy as a whole ,for instance,savings are a private virtue but a public vice,if total savings in the economy increase,they may initiate a depressions unless they are invested again,if an individuals depositor withdraws his money from the bank there is no danger;but if all depositors do this simultaneously ,there will be a run on the banking system will be adversely affected.
SCOPE AND IMPORTANTS OF MICROECONOMICS
SCOPE AND IMPORT ANTS OF MICROECONOMICS
FOR UNDERSTANDING THE BEHAVIOR OF INDIVIDUALS UNITS :
Last but not the least,for understanding the behavior of individuals units the study of macroeconomics is imperative,demand for individual products depends upon aggregate demand in the economy,unless the causes of deficiency in aggregate demand are analyzed,it is not possible to understand fully the reasons for a fall in the demand of individual products,the reasons for increase in costs of a particular firm or industry can not be analysed without knowing the average cost conditions of the whole economy,thus the study of individuals units is not possible without macroeconomics.
we may conclude that macroeconomics enriches our knowledge of the functioning of an economy by studying the behaviour of national income,output,investment,saving and consumptions,moreover,it throws much light in solving the problems of unemployments ,inflation,economics instability and economic growth.
FOR UNDERSTANDING THE BEHAVIOR OF INDIVIDUALS UNITS :
Last but not the least,for understanding the behavior of individuals units the study of macroeconomics is imperative,demand for individual products depends upon aggregate demand in the economy,unless the causes of deficiency in aggregate demand are analyzed,it is not possible to understand fully the reasons for a fall in the demand of individual products,the reasons for increase in costs of a particular firm or industry can not be analysed without knowing the average cost conditions of the whole economy,thus the study of individuals units is not possible without macroeconomics.
we may conclude that macroeconomics enriches our knowledge of the functioning of an economy by studying the behaviour of national income,output,investment,saving and consumptions,moreover,it throws much light in solving the problems of unemployments ,inflation,economics instability and economic growth.
SCOPE AND IMPORTANTS OF MICROECONOMICS
SCOPE AND IMPORTANT OF MICROECONOMICS
IN BUSINESS CYCLES:
Further macroeconomics as an approach to economic problems started after the great depression,thus its importance lies in analyzing the causes of economics fluctuations and in providing remedies
IN BUSINESS CYCLES:
Further macroeconomics as an approach to economic problems started after the great depression,thus its importance lies in analyzing the causes of economics fluctuations and in providing remedies
SCOPE AND IMPORTANTS OF MICROECONOMICS
SCOPE AND IMPORTANT OF MICROECONOMICS
IN MONETARY PROBLEMS:
It is in terms of macroeconomics that monetary problems can be analyzed and understood properly, frequent changes in the value of money -inflation or deflation-affect the economy adversely, they can be counteracted by adopting monetary, fiscal and direct control measures for the economy as a whole.
IN MONETARY PROBLEMS:
It is in terms of macroeconomics that monetary problems can be analyzed and understood properly, frequent changes in the value of money -inflation or deflation-affect the economy adversely, they can be counteracted by adopting monetary, fiscal and direct control measures for the economy as a whole.
SCOPE AND IMPORTANCE OF MACROECONOMICS
SCOPE AND IMPORTANCE OF MACROECONOMICS
IN ECONOMIC GROWTH:
The economics of growth is also a study in macroeconomics ,it is on the basis of macroeconomics that the re-sources and capabilities of an economy are evaluated ,plans for the overall increase in national income ,output,employments are framed and implemented so as to raise the level of economic developments of the economy as a whole.
IN ECONOMIC GROWTH:
The economics of growth is also a study in macroeconomics ,it is on the basis of macroeconomics that the re-sources and capabilities of an economy are evaluated ,plans for the overall increase in national income ,output,employments are framed and implemented so as to raise the level of economic developments of the economy as a whole.
SCOPE AND IMPORTANCE OF MACROECONOMICS
SCOPE AND IMPORTANCE OF MACROECONOMICS
IN NATIONAL INCOME:
The study of macroeconomic is very important for evaluating the overall performance of the economy in terms of national income ,with the advent of the great depression of the 1930s,it became necessary to analyze the causes of general over productions and general unemployment's ,this led to the construction of the data on national income ,national income data help in forecasting the level of economic activity and to understand the distribution of income among different group of people in the economy
IN NATIONAL INCOME:
The study of macroeconomic is very important for evaluating the overall performance of the economy in terms of national income ,with the advent of the great depression of the 1930s,it became necessary to analyze the causes of general over productions and general unemployment's ,this led to the construction of the data on national income ,national income data help in forecasting the level of economic activity and to understand the distribution of income among different group of people in the economy
SCOPE AND IMPORTANCE OF MACROECONOMICS
SCOPE AND IMPORTANCE OF MACROECONOMICS
IN GENERAL UNEMPLOYMENT'S:
The Keynesian theory of employment is an exercise in macroeconomics ,the general level of employment in an economy depends upon effective demand which in turn depends on aggregate demand and aggregate supply functions .unemployment's is thus caused by deficiency of effective demand ,in order to eliminate it,effective demand should be raised by increasing total investment, mics has special significance in studying the causes ,effects and remedies of general unemployment's.
IN GENERAL UNEMPLOYMENT'S:
The Keynesian theory of employment is an exercise in macroeconomics ,the general level of employment in an economy depends upon effective demand which in turn depends on aggregate demand and aggregate supply functions .unemployment's is thus caused by deficiency of effective demand ,in order to eliminate it,effective demand should be raised by increasing total investment, mics has special significance in studying the causes ,effects and remedies of general unemployment's.
SCOPE AND IMPORTANCE OF MACROECONOMICS
SCOPE AND IMPORTANCE OF MACROECONOMICS
IN ECONOMIC POLICIES:Macroeconomics is extremely useful from the points of view of economic policy ,modern governments,especially of the underdeveloped economics ,are confronted with innumerable national problems,they are the problems of overpopulation ,inflation,balance of payments ,general underproduction etc. the main responsibility of these governments rests in the regulations and control of overpopulation ,general prices ,general volume of trade,general outputs ,etc.tinbergen says:'working with macroeconomics concepts is a bare necessity in order to contributes to the solutions of the great problems of our times,'no government can solve these problems in terms of individuals behaviors ,let us analysis the use of macroeconomics study in the solution of certain complex economic problems.
IN ECONOMIC POLICIES:Macroeconomics is extremely useful from the points of view of economic policy ,modern governments,especially of the underdeveloped economics ,are confronted with innumerable national problems,they are the problems of overpopulation ,inflation,balance of payments ,general underproduction etc. the main responsibility of these governments rests in the regulations and control of overpopulation ,general prices ,general volume of trade,general outputs ,etc.tinbergen says:'working with macroeconomics concepts is a bare necessity in order to contributes to the solutions of the great problems of our times,'no government can solve these problems in terms of individuals behaviors ,let us analysis the use of macroeconomics study in the solution of certain complex economic problems.
SCOPE AND IMPORTANCE OF MACROECONOMICS
SCOPE AND IMPORTANCE OF MACROECONOMICS
As a method of economic analysis macroeconomics is of much theoretical and practical importance.
1>To understand the working of the economy :The study of macro economic variable is indispensable for understanding the working of the economy ,our main economic problems are related to the be -level in the economy ,these variables are statistically measurable thereby facilitating the possible of analyzing the effects on the functioning of the economy ,as tinbergen observes,macroeconomic concepts helps in'making the elimination process understandable and transparent',for instance,one may not agree on the best method of measuring different prices ,but the gerneral prices level is helpful in understanding the nature of the economy.
As a method of economic analysis macroeconomics is of much theoretical and practical importance.
1>To understand the working of the economy :The study of macro economic variable is indispensable for understanding the working of the economy ,our main economic problems are related to the be -level in the economy ,these variables are statistically measurable thereby facilitating the possible of analyzing the effects on the functioning of the economy ,as tinbergen observes,macroeconomic concepts helps in'making the elimination process understandable and transparent',for instance,one may not agree on the best method of measuring different prices ,but the gerneral prices level is helpful in understanding the nature of the economy.
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