Our Business Studies Notes
Part A – Principles and Functions of Management
Part B – Business Finance and Marketing
1. Meaning of Macroeconomics
Macroeconomics is the branch of economics that studies the economy as a whole, focusing on large-scale aggregates such as national income, employment, output, inflation, and economic growth, rather than individual units.
2. Macroeconomic Problems and Scope
Macroeconomics deals with broad issues like:
Determination of national income and output
Employment and unemployment
Price stability and inflation control
Balance of payments
Economic growth and development
Scope includes:
Theory of national income
Theory of employment
Money and banking
Government budget
International trade and finance
3. Basic Economic Activities
The economy performs three main activities:
Production – Creating goods and services.
Consumption – Using goods and services to satisfy wants.
Investment – Addition to capital stock for future production.
4. Central Problems of an Economy
Every economy faces problems of:
What to produce (choice of goods and services)
How to produce (choice between labour-intensive and capital-intensive techniques)
For whom to produce (distribution among population)
Efficient use of resources and growth
5. Types of Goods
Consumption Goods – Used by households for direct satisfaction of wants.
Capital Goods – Used for production of other goods.
Final Goods – Ready for consumption or investment; included in national income.
Intermediate Goods – Used as inputs for producing other goods; excluded from national income.
6. Final vs. Intermediate Goods
Final goods are for end use, value added counted in GDP.
Intermediate goods are used up in production, their value already included in final goods to avoid double counting.
7. Stock and Flow Variables
Stock – Measured at a particular point of time (e.g., money supply on 31 March).
Flow – Measured over a period of time (e.g., national income in a year).
8. Factor Income vs. Transfer Income
Factor Income – Payment for services of factors of production (rent, wages, interest, profit).
Transfer Income – Income received without providing factor services (pensions, gifts, donations).
9. Real vs. Nominal Variables
Nominal – Measured at current prices.
Real – Measured at constant prices (adjusted for inflation).
10. Importance of Macroeconomics
Helps in policy formulation.
Studies interdependence between sectors.
Explains causes of unemployment and inflation.
Guides in economic planning and growth strategies.