INPUTS OF MACROECONOMY Policy Instruments (Fiscal Policy, Monetary Policy, Income Policies, Foreign Economic Policies) External Variables

(Weather, Foreign Output, Revolutions, Wars ) OUTPUTS OF MACROECONOMY Output Employment and Unemployment Prices Net Exports Demand: consumer s desire and willingness to pay a price for a specific good or service. Aggregate Demand : refers to the TOTAL quantity of output that consumers, businesses, foreigners and governments are WILLING TO SPEND for a given period : is a combination of the price level and level of output at which the goods and money markets are simultaneously in equilibrium. : forces (money, spending and taxes, others )

Variable Policy Variables Monetary Policy (change in interest rates)

Impact o in money supply, q interest rates = improved credit conditions = more investments q tax rates, o income =o in expenditure, o spending

Fiscal Policy ( refers to changes in government spending, welfare, taxation and borrowings) External Variables Expectations and business confidence (anticipated future income, profit and inflation)

Foreign Output (exchange rates, foreign income) Asset Values (value of assets owned by consumers) Demographic Changes (characteristics of the population)

expected o in income encourages spending. expected o in inflation rates encourages spending now than later. expect q, o savings and postpones investment foreign boom increases exports o qin value, oq borrowing to finance consumption higher population, increases consumption