MACROECONOMICS
&
THE GLOBAL ECONOMY

Instructor
SATYENDRA TIMILSINA

What is Macroeconomics?
• It is that branch of economics, which deals economic affairs at large i.e. total or aggregates • Concerns itself with variables such as
–
–
–
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Aggregate output of the economy
Extent to which its resources are used
Size of National Income
General Price Level

Introduction
• Managers have to deal with economic environment at two levels – micro level and macro level
• Micro level includes market structure and the strength of competitors. Firm’s decision making is mostly influenced by the activities of its rival forms. The following are some factors that affect firms decision at micro level
– Level of competition
– Cost of production and
– Product differentiation

Introduction
• Macro level includes the overall system. This is something that the firm assumes to the given.
• Decision making of the firm is affected by the macroeconomic environment.
• The following macroeconomic factors have a strong effect on firm’s decision making
– Overall Demand
– Price Level
– Rate of interest
– Tax policies and
– Exchange Rates

Introduction
• It is important for managers to know the macroeconomics because an unprecedented change in any of these factors can upset the revenue and cost of the firm, affecting the profitability and returns.
• The problem can be minimized or managed if managers know the working of an economy and thereby, judge the direction of possible changes in macroeconomic variables and policies.
• With this, they can even assess the best timing to take new investment decisions

Macroeconomic Issues
• Three major issues of Macroeconomics are
– National Output
– Inflation
– Unemployment

Macroeconomic Policies
• Two major Macroeconomic policies are
– Fiscal Policy
– Monetary Policy

Workings of