Question

Identify four important macroeconomic questions or issues and explain briefly why each is important

Answer 1

Ans.
The four major macroeconomic questions or issues are as follows:

• Inflation: it is a situation in which the prices of the commodities and the factors of production constantly increases. During this situation, many people lose and many of them gain. There is a complete change in a set pattern of income distribution in an economy. This becomes one of the main objectives of the government policies for ensuring the stability of price level which implies the absence of situations like inflation and deflation.
• Unemployment: it is the involuntary idleness of the resources mainly manpower. In such a situation the GNP of an economy becomes lesser than its potential output. The government has to ensure the situation of full employment because of which there will be the absence of unemployment in the economy.
• Deflation: it refers to the situation in which the real value of the debt increases, as a result of which the spending power of the consumers and firms is decreased. In such a case the decreasing prices discourage the spendings because the consumers then delay their purchases, for the time being.
• Trade Cycle: it consists of the periodic fluctuations by which the levels of economic or the business activities go through which is the tendency for employment and output to fluctuate over a specific time in recurring the sequence of the fluctuations. In the period of boom, the employment is decreased but the rate of inflation remains high and in the period of depression, the unemployment rises but the rate of inflation remains moderate.