Macroeconomics:

Macroeconomics is a branch of economics dealing with the performance, structure, behavior, and decision-making of the entire economy. This includes a national, regional, or global economy. Macroeconomists study aggregated indicators such asGDP, unemployment rates, and price indices to understand how the whole economy functions. Macroeconomists develop models that explain the relationship between such factors as national income, output, consumption, unemployment, inflation, savings, investment, international trade and international finance. Gross domestic product: Gross domestic product (GDP) refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living. Price index A price index (plural: price indices or price indexes) is a normalized average (typically a weighted average) of prices for a given class of goods or services in a given region, during a given interval of time. It is a statistic designed to help to compare how these prices, taken as a whole, differ between time periods or geographical locations.

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F r parti larl broad i di

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to measure t e economy's price level or a cost of living. More narrow price indices can help producers with business plans and pricing. Sometimes, they can be useful in helping to guide investment. Some notable price indices include:
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Consumer price index Producer price index GDP deflator

Consumption Defi i i f Consumption: Consumption refers to consume the want satisfying capability

of a commodity or consumption means the consumption of utility. Consumption is a common concept in economics, and gives rise to derived concepts such as consumer debt. Generally, consumption is defined in part by comparison to production. But the precise definition can vary because different schools of economists define production quite differently. According to mainstream economists, only the final purchase of goods and services by individuals constitutes consumption, while other types of expenditure in particular, fixed investment, intermediate consumption and government spending are placed in separate categories. Inflation In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time. [1] When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money a loss of real value in the internal medium of exchange and unit of account in the economy.[2][3] A chief measure of price inflation is the inflation rate, the annuali ed percentage change in a general price index (normally the Consumer Price Index) over time.[4]

Inflation's effects on an economy are various and can be simultaneously positive and negative. Negative effects of inflation include a decrease in the real value of money and other monetary items over time, uncertainty over future inflation may discourage investment and savings, and high inflation may lead to shortages of goods if consumers begin hoarding out of concern that prices will increase in the future. Positive effects include ensuring central banks can adjust nominal interest rates (intended to mitigate recessions),[5] and encouraging investment in non-monetary capital projects. Saving Saving is income not spent, or deferred consumption. Methods of saving include putting money aside in a bank or pension plan.[1] Saving also includes reducing expenditures, such as recurring costs. In terms of personal finance, saving specifies low-risk preservation of money, as in a deposit account, versus investment, wherein risk is higher. Investment Investment has different meanings in finance and economics. In Finance investment is putting money into something with the expectation of gain, that upon thorough analysis, has a high degree of security of principle, as well as security of return, within an expected period of time.[1] In contrast putting money into something with an expectation of gain without thorough analysis, without security of principal, and without security of return is speculation or gambling. Investment is related to saving or deferring consumption. Investment is involved in many areas of the economy, such as business management and finance whether for households, firms, or governments. International trade International trade is exchange of capital, goods, and services across international borders or territories.[1] In most countries, it represents a significant share of gross domestic product (GDP). International finance

International finance is the branch of economics that studies the dynamics of exchange rates, foreign investment, global financial system, and how these affect international trade. It also studies international projects, international investments and capital flows, and trade deficits. It includes the study of futures, options and currency swaps. International finance is a branch of international economics Microeconomics

Microeconomics is a branch of economics that studies the behavior of how the individual modern household and firms make decisions to allocate limited resources. Typically, it applies to markets where goods or services are being bought and sold. Microeconomics examines how these decisions and behaviors affect the supply and demand for goods and services, which determines prices, and how prices, in turn, determine the quantity supplied and quantity demanded of goods and services. One of the goals of microeconomics is to analyze market mechanisms that establish relative prices amongst goods and services and allocation of limited resources amongst many alternative uses. Business Cycles The 1970-75 Cycle (The Great Recession) Longest and most severe post-WWII recession (16 months, 3.6% decline in real GDP, and 13% decline in industrial production)

 Causes of recession included both demand factors and supply factors: a. Inflation due to relatively easy monetary policy prior to 1973 b. Poor crop that drove up food prices c. Rapid increase in energy prices due to OPEC cartel d. Excessive inventory buildup and real estate speculation Endogenous forces set the stage for recovery as inflation slowed and inventories were worked down. Consumer debt was repaid and adjustments were made to higher energy prices. The 1980 and 1981-82 Recessions: Higher rates of inflation and lower real interest rates had maintained spending for housing and consumer durables until 1979. In late 1979 the Fed switched to monetary aggregates as a monetary policy target with resulting overnight increases in nominal interest rates. Private borrowing fell over 50% during the second quarter of 1980. In early July the Fed eased credit and interest rates fell resulting in renewed expansion over the 12 months from August 1980. Inflation remained in double-digit levels. The Fed again turned restrictive in and, together with high rates of inflation, pushed nominal interest rates upward to about 20 percent. Housing and consumer durable demand fell by over 10 percent. Cooling inflation and tax cuts enacted in 1981 led to economic recovery that continued from 1982 to 1990 (92 months). The 1990-91 Recession: The official business cycle peak of July 1990 was not recogni ed until 9 months later and, in fact, real GDP did not fall until the fourth quarter of 1990. Iraqs invasion of Kuwait occurred August 1990 and public debate centered upon the impact of US involvement on domestic economic conditions.

 Higher debt loads by households and business and financial industry imbalances were a fundamental reason for the economic downturn. The invasion of Kuwait was probably a contributing factor. The economic recovery was slow relative to prior periods and, in fact, the unemployment rate increased because economic growth in the last three quarters of 1991 was 1.4, 1.8, and 0.3 percent, respectively. The 2001 recession Probably began in the second half of 2000 as industrial production declined in response to overinvestment in late 1990s Business investment in capital spending decreased and remained soft during recovery A relatively mild recession due to the resiliency of household spending and relatively strong housing demand. Labor markets reflect slow employment demand relative to output (jobless recovery)