How to Microeconomics is related to the concept of stock and flow in Economics

MICRO-ECONOMICS IS RELATED TO STOCK AND FLOW CONCEPT 

The Aggregate of microeconomics are of two kind sum are stocks, typically the stock of capital k which is a timeless concept. Even in period analysis a stock must be specified at a particular movement. Other aggregate are flow or such as income and output, consumption and investment.A flow variable has the time dimension t, as per unit of time or per period.

Stock is the quantity of any economic variable relating to a point of time. For example, Store of cloth in a shop at a point of time is Stock. Flow is the quantity of an economic variable relative of a period of time.

The monthly income and expenditure of an individual, receipt of early interest rate on various deposit in a bank, sale of commodity in a month or some example of flow.

In  price theory of microeconomics, the concept of stock and flow are related to the demand for and supply of   goods the market demand and supply of goods at a point of time or expressed as stock. the stock demand curve of a good slope downward from left to right   like an ordinary demand curve, Which depend upon price.

But the stock supply curve of a good is parallel to the y axis because the total quantity of stock of a good is constant at a point of time.  On the other hand, the flow demand and supply curve are like the ordinary demand and supply curve which are influenced by current prices. But the price is neither a stock a flow variable because it doesn't not need a time dimension.   In fact it is a ratio between the flow of cash and the flow of goods.

Concept of Stock and Flow in Economics

Concept of Stock and Flow in Economics 

The Aggregate of microeconomics are of two kind sum are  stocks, typically the stock of capital k which is a timeless concept. Even in period analysis a stock  must be specified at a particular movement. Other aggregate are flow or such as income and output, consumption and investment.A flow variable has the time dimension t, as per unit of time or per period.

Stock is the quantity of any economic variable relating to a point of time. For example, Store of cloth in a shop at a point of time is Stock.  Flow is the quantity of an economic variable relative of  a period of time.

The monthly income and expenditure of an individual, receipt  of early interest rate on various deposit in a bank, sale of commodity in a month or some example of flow.

Stock and flow are both variable in nature and the distinction between them should be studied carefully to understand the development of the economic variables.

Generally, most of the economic variable that are studied are categorised either as stock or flow  variable. Stock refer to any quantity that is measured at a particular point in a time, while Flow is referred to as the quantity that can be measured over a period of time.

Both the stock and flow are interdependent on each other, The concept of stock and flow is very essential in Economics, It help to understand the development of economic variables.

 

Dependence of Macroeconomic on Microeconomics

Macroeconomics  is the study of activity related to  aggregate such as national income, total output, general price level, etc. But this macroeconomics variables are the total sum of microeconomics variables therefore Macroeconomics is dependent upon Microeconomics the dependence of Macroeconomic on Microeconomics.

Microeconomicss the study of individual part of the economy where macroeconomic is the study of economy as a whole but it is quite wrong to think that these two approaches are separate different and unconnected to each other approach is complete without the other through economist might emphasize one or the other of the analysis according to their convincence the two approaches are not competitive but complementary to each other.

strictly speaking there is only one 'economics'. The Macroeconomic theory has a foundation in Microeconomic theory and Microeconomic theory has  foundation is Macroeconomic theory-

                                   Edward Shapiro 

 

From the above opinion of Edward Shapiro. It is clear that micro and macro economics are interdependent with each other and one cannot exist is absence of another. The interdependence of micro and macroeconomic can be explained by the help of the following headings:-

Dependence of Macroeconomic on Microeconomics

Macroeconomics  is the study of activity related to  aggregate such as national income, total output, general price level, etc. But this macroeconomics variables are the total sum of microeconomics variables therefore Macroeconomics is dependent upon Microeconomics the dependence of Macroeconomic on Microeconomics can be explained as follows:- 

(1):-Determination of national income-

National income is the subject matter of macroeconomics  but national income is calculated by the total sum of individual income. The study of individual income is the subject matter of microeconomic. Thus, Macroeconomics dependent upon Microeconomics 

(2):-Determination of price level-

The determination of price level is a subject matter of macroeconomics but it is the average of all prices of individual goods and services. Thus macroeconomic  is dependent upon microeconomics.

(3):-Determination of employment level-

The determination of employment level is for the studied under macroeconomics but to find out the level of employment in economy, The employment provided by each and every firm has to study of microeconomics necessary for the determination of employment.

(4):- Determination of investment-

Investment theory is the subject matter of macroeconomics but the investment is determined by the rate of interest expected rate of profit. The rate of interest and profit are studied under microeconomics. Thus, Macroeconomics is dependent upon Microeconomics.

(5):- Study of total saving income-

The total saving of any economy depends upon the saving of different sector, i.e, total saving is the sum of personal saving, business saving, and government saving, The saving in different sector of the economy is studied under the Microeconomics. Thus, Macroeconomics is dependent upon microeconomics.

Dependence of Microeconomic on Macroeconomics and Dependence Macroeconomics upon Microeconomics

 

Dependence of Microeconomic on Macroeconomics

Microeconomics is the study of individual part of the economy where macroeconomic is the study of economy as a whole but it is quite wrong to think that these two approaches are separate different and unconnected to each other approach is complete without the other through economist might emphasize one or the other of the analysis according to their convincence the two approaches are not competitive but complementary to each other.

strictly speaking there is only one 'economics'. The Macroeconomic theory has a foundation in Microeconomic theory and Microeconomic theory has  foundation is Macroeconomic theory-

                                 Edward Shapiro 

 

From the above opinion of Edward Shapiro. It is clear that micro and macro economics are interdependent with each other and one cannot exist is absence of another. The interdependence of micro and macroeconomic can be explained by the help of the following headings:-

Dependence of Microeconomic on Macroeconomics

Macroeconomics is the study of economic activity. Related to individuals such as the output of a firm, price of a commodity, individual demand or consumption, determination of Wages etc. But these microeconomics activity are dependent on macroeconomics the interdependence of microeconomics can be explained as follows:-

(1):- Determination of Consumption-

Is Consumption is the subject matter of microeconomic because it is an individual economic activity. consumption of an individual depend upon the consumption of goods and services by the society in a particular place. Hence microeconomic is depended on Macroeconomics.

(2):- Determination of product price:-

 

The determination of the price of a commodity depend upon the general price level in the economy. The determination of the General price level in the subject matter of macroeconomics Wheres the determination of individual price is the subject matter of microeconomics. Hence, microeconomics is dependent on upon macroeconomics.

(3):- Determination of Wages rate-

The determination of wage rate of labour is the subject matter of microeconomics. It is affected by the wage rate of all labour, of the economy has in the determination of the wage rate of labour, microeconomics is dependent upon Macroeconomics.

(4):- Determination of profit- 

The Determination of profit is studied under microeconomics. But it is dependent on microeconomic variable like employment level, aggregate demand, national income, General price level, etc. Hence, in the determination of profit microeconomic is dependent upon macroeconomics.

(5):- Determination of interest rate- 

Interest rate is the subject matter of microeconomics but it is determined by interaction between macroeconomic variables like demand for and supply of money. hence, microeconomics is dependent upon Macroeconomics.

Dependence of Macroeconomic on Microeconomics

Macroeconomics  is the study of activity related to  aggregate such as national income, total output, general price level, etc. But this macroeconomics variables are the total sum of microeconomics variables therefore Macroeconomics is dependent upon Microeconomics the dependence of Macroeconomic on Microeconomics can be explained as follows:- 

(1):-Determination of national income-

National income is the subject matter of macroeconomics  but national income is calculated by the total sum of individual income. The study of individual income is the subject matter of microeconomic. Thus, Macroeconomics dependent upon Microeconomics 

(2):-Determination of price level-

The determination of price level is a subject matter of macroeconomics but it is the average of all prices of individual goods and services. Thus macroeconomic  is dependent upon microeconomics.

(3):-Determination of employment level-

The determination of employment level is for the studied under macroeconomics but to find out the level of employment in economy, The employment provided by each and every firm has to study of microeconomics necessary for the determination of employment.

(4):- Determination of investment-

Investment theory is the subject matter of macroeconomics but the investment is determined by the rate of interest expected rate of profit. The rate of interest and profit are studied under microeconomics. Thus, Macroeconomics is dependent upon Microeconomics.

(5):- Study of total saving income-

The total saving of any economy depends upon the saving of different sector, i.e, total saving is the sum of personal saving, business saving, and government saving, The saving in different sector of the economy is studied under the Microeconomics. Thus, Macroeconomics is dependent upon microeconomics.

Dependence of Microeconomic on Macroeconomics

Microeconomics is the study of individual part of the economy where macroeconomic is the study of economy as a whole but it is quite wrong to think that these two approaches are separate different and unconnected to each other approach is complete without the other through economist might emphasize one or the other of the analysis according to their convincence the two approaches are not competitive but complementary to each other.

strictly speaking there is only one 'economics'. The Macroeconomic theory has a foundation in Microeconomic theory and Microeconomic theory has  foundation is Macroeconomic theory-

                                   Edward Shapiro 

 

From the above opinion of Edward Shapiro. It is clear that micro and macro economics are interdependent with each other and one cannot exist is absence of another. The interdependence of micro and macroeconomic can be explained by the help of the following headings:-

Dependence of Microeconomic on Macroeconomics

Macroeconomics is the study of economic activity. Related to individuals such as the output of a firm, price of a commodity, individual demand or consumption, determination of Wages etc. But these microeconomics activity are dependent on macroeconomics the interdependence of microeconomics can be explained as follows:-

(1):- Determination of Consumption-

Is Consumption is the subject matter of microeconomic because it is an individual economic activity. consumption of an individual depend upon the consumption of goods and services by the society in a particular place. Hence microeconomic is depended on Macroeconomics.

(2):- Determination of product price:-

 

The determination of the price of a commodity depend upon the general price level in the economy. The determination of the General price level in the subject matter of macroeconomics Wheres the determination of individual price is the subject matter of microeconomics. Hence, microeconomics is dependent on upon macroeconomics.

(3):- Determination of Wages rate-

The determination of wage rate of labour is the subject matter of microeconomics. It is affected by the wage rate of all labour, of the economy has in the determination of the wage rate of labour, microeconomics is dependent upon Macroeconomics.

(4):- Determination of profit- 

The Determination of profit is studied under microeconomics. But it is dependent on microeconomic variable like employment level, aggregate demand, national income, General price level, etc. Hence, in the determination of profit microeconomic is dependent upon macroeconomics.

(5):- Determination of interest rate- 

Interest rate is the subject matter of microeconomics but it is determined by interaction between macroeconomic variables like demand for and supply of money. hence, microeconomics is dependent upon Macroeconomics.

Limitations Of Macroeconomics 

(1):- Fallacy of composition- In macroeconomic analysis the Fallacy of composition is involved, aggregate  economic behaviour is the sum total of individual activities but what is true of individuals is not necessarily true of the economy as a whole.

(2):- To regard the aggregate as Homogeneous - The main defeat is micro analysis is that is regards the aggregate as Homogeneous without carrying about their internal composition and structure. The average wage in a country is the sum total of wages in all occupations.

(3):- Aggregate variable may not be important necessarily- The aggregate variable which form of the economic system in of much significance for stands the national income of a country is the total of all individual income.

(4):- Indiscriminate use of macroeconomic  misleading- 

An indiscriminate and uncritical use of macroeconomic in analysing the problem of the real world can obtain be misleading.

(5):- Statical and Conceptual Difficulties-  The measurement of macroeconomic concept involved a number of statical and conceptual difficulties. These problems relate to the aggregation of macroeconomic variable. If individual units, similar aggregation does not present much difficulties.

What is Welfare economics

 WELFARE ECONOMIC

'Welfare' is a state of the mind which reflect human happiness and satisfaction. it actually, welfare is a happy state of humen mind, Pigou regards individual welfare as the sum total of the satisfactions experienced by an individual and social welfare as the sum of total of individual welfare.

He divides welfare into economics welfare and non economic welfare. economic welfare is the part of social welfare which can directly or indirectly be measured in the money.  Pigou attaches great importance to economic welfare because welfare is a very wide term.

In his words : The range of our enquiry becomes restricted to that part of social welfare that can be brought directly or indirectly into relation with the measuring rod of money. on the country, Non economic welfare is  that part of social welfare which cannot be measured in money, for instance moral welfare.

But is not proper to differentiate between economic and non-economic welfare on the basis of money. Pigou also accept it. According to him, Non economic welfare can be improved upon two ways, First, by the income earning method longer hour of working and unfavorable condition will affect economic welfare adversity.

Second, by the income spending method. It is assumed in economic welfare that expenditures incurred on different consumption goods provide the same amount of satisfaction. But in actuality  it is not so because when the utility of purchased good starts dimensioning the non-economic welfare declines which result in reducing the total welfare.

But it is not possible always, because the causes that lead to an increase in economic welfare may also reduce non-economic welfare. The increase in total welfare may, there for be less than anticipated. For instance, with the increase in income both the economic welfare and total welfare increase and vice versa.

But economic welfare depend not only on the amount of income but also on the method of earning and spending it when the worker earn more by working in factories but decide in slums and vitiated atmosphere, the total welfare cannot be said to have increased even throw the economic welfare might have increased, Hence economic welfare is not an indicator of total welfare because the economic welfare is not always related to our  social status of Human.

welfare economics is a branch of economics that use microeconomics technique evaluate well being at the aggregate

Attempting to apply the principal of welfare economics give rise to the field of public economic the study of how government might intervenes to improve social welfare.

Welfare economics always provide the theoretical foundation for particular instrument of public economics including post benefit analysis while the combination of welfare economic and inside for behaviour economic has led to the creation of a new subfield behaviour economic.

The field of welfare economic is associated with the fundamental theorem, the first state that given certain assumptions competitive market produce efficient outcome it capture the logical of Adam Smith invisible hand.

The second state that given fruther restriction any Pareto efficient outcome can be supported as a competitive market equilibrium, thugs of social planner could use our social welfare function to pick the most equitable efficient outcome then use lump some transfer followed by competitive trade to bring it about because of welfare economic close price to social choice theory Arrow impossibility theorem is some time listed as third fundamental theorem.

The Global Macro Strategy

      The Global Macro Strategy 

A global macro strategy is an investment and trading strategy that centres around large macro economics event at our national or global level global macro involves research and analysis of numerous macroeconomics factor including interest rates, currency level,  political development and country relations.

A global macro strategy is hedge fund or  mutual fund strategy that bases it's holding primarily on the over all economics and political view of various countries or the macroeconomics principles. Holding  how many include long and short position in various equity, fixed income, currency, commodities, and  futures markets.

Global macro is an investment strategy based on the interpretation and prediction of large-scale events related to National economics, history, and international relations. The strategy typically employee forcasts and analysis of interest rate trends, international trade and payment,  political changes, government policies, in the government relations, and other broad systematic factors.

Type of Global Macro Strategy

Global macro strategy or categoriesd according to the macroeconomics element on the most there are three main kinds:

(1):- Currency Strategies 

 

In currency Strategies, fund often look for opportunities based on the relative strength of one currency vs another. It pays close attention to various countries' monetary policy and short term interest rates. currency and currency derivatives are the most common instrument employed in such strategy because currency techniques may be traded with leverage, they may yield attractive profits. the high leverage , on the other hand makes the deals exceedingly risky.

(2):- Interest Rate Strategy

This sort of global macro strategy focuses  on the sovereigns debt  interest rates, making both directional and relative value trades. a country's monetary policy as well as its economy and political status are all heavily emphersiaed in such a plans. Government debts and derivatives based on such securities or the most popular financial instruments used in the approach. they may also invest in debt issue by other developed and developing country.

(3):- Stock Index Strategies

These strategies use features of options, and exchange traded funds to analysis a country equity or commodity index. during period of low-interest rate fund managers, aim to bulid portfolios that beat the index. They mostly concentrate on liquid assets that can be exchanged quickly in time of uncertainty.

Market risk are the only drawback to these investments, which are to be expected. these means there are no additional concerns such as liquidity or credit. Various derivatives on equity index are routinely used to implement stock index strategies. 

Types of Global Macro Fund

Global macro funds are classified by the excution manner of the strategies in addition to the distinctions in strategy it can be divided into Three category

(1):- Commodity Trading Advisor (CTA)

global macro fund employee variety of investment products, but instead of building portfolio based on top-level views,  This funds use price-based and trend-following algorithm to assist in building portfolios and executing trades.

(2):- Discretionary

The fund manager's fundamental analysis is used to build the portfolio. it is the most adorable form of global macro fund allowing fund manager to invest in a wide range of assets. This sort of global macro fund is the most adoptable since managers can go long or short on any asset from anywhere.

(3):- Systematic

Fundamental analysis is used to design portfolio and algorithm are used to excuse trades. a mix of discretionary global macro and CTA funds, this style of investment combines the best on both worlds.

Example of Global Macro Strategy

Suppose Mr X has a holding of stocks and Futures options in Indian indexes for the rupees. After Covid-19, he feels that India is about to enter a recession phase. In the sell stock and Futures loses. He could also perceive a huge possibility for  growth in some other country say the U. S, so is next move will be to take long holding in its assets.

HISTORY OF MACROECONOMICS

 

HISTORY OF MACROECONOMICS

The term 'macro' was first used in economics by Ragner Frisch in 1933.

But as a methodology approach to economic problem it originated with the mercantilists in the 16th and 17th centuries. They are there concerned with the economics system as a whole.

In the 18th century the physiocrats adopted Economique to show the circulation of wealth three classes represented by the farmer landlords and the striles class.

Malthas, Sismondi and Marx in the 19th century dealt with the macro economics problem Walrus, Wicksell and Fishers where the modern contributor to the development of the Macroeconomic analysis before the Keynes.

The Macroeconomics credit to generate the caves who finally developed a general theory of income output and employment in the wake of the great depression.

Macroeconomics, as it is modern form, is often define as starting with John Maynard Keynes  and the publication of the his book The General Theory of Employment, Interest and Money in 1936.

Keynes offered and explanation for the fall out from The Great Depression, when goods remain unsold and worker unemployed Keynes theory attempt to explain why market may not clear

Prior to the  popularization of Keynes's theories and economics did not generally differentiate between micro and macroeconomics.

The same microeconomics law of supply and demand that operate in individual good market where understood to interact between individual market to bring the economy into general equilibrium as described by Leon Walras. The link between good market and large-scale financial variable such as price level and interest rate was explained through the unique role that money plays in the economy as a medium of exchange by economists such as Knut Wicksell, Irving Fishers,and Mises.

Throughout the 20th century,  Keynesian economics, as Keynes's theories become known, diverged into serveral other school of thought.

The Scope Of Macroeconomics

THE SCOPE AND IMPORTANCE OF MACROECONOMICS 

Macroeconomics is an essential field of study for economists. Government financial bodies, and researchers analysis general National issue and economic well being.It is mainly cover the major fundamental of macroeconomics theory and macroeconomics policies.

 The macroeconomics theory involve economic growth and development, national income, Money, international trade, employment and general price level.

The study of problem like  unemployment in India, the general price level or the problem of balance of payment, is a part of the macro economics study because it relate to the economy. 

THE SCOPE OF MACROECONOMICS 

(1)Two understand the working of the economy:-  The study of microeconomics variable is in dispensable for the for understanding the working of the economy problem are related to the behaviour of total income, output employment and the general price level in the economy.

(2) In economic policies:-. Macroeconomics is extremely useful from the point of view of economics policy, modern Government especially of the under development economics are confronted with innumerable National problems, they are problem of overpopulation, inflation, balance of payment, general under production, etc. The main responsibility of these government reset in the regulation and control of overpopulation,general prices, general volume of trade, general output, etc.

(3) In general under employment:-. the Keynesian theory of employment is an exercise in microeconomics the general level of employment in an economic, depend upon effective demand which in turn depend or aggregate demand and aggregate supply functions.

(4). In National Income:-. the study of microeconomics is very important for evaluating the over all performance of the economy in the term of national income. because in the great depression of the 1930 become necessary to analyse the cause of general overproduction  and general unemployment.

(5). In economic growth:-- the economic growth is also a study in microeconomics it is on the basis of macroeconomics that the resource and capability of any economy are evaluated.

(6). in monetary problem.  It is in term of microeconomics that monetary problem can be analysed and understood properly they can be contracted by adopting monetary physical and direct control measures for the economic as a whole.

(7):- The Business Cycles. Feather macroeconomics is as an approach to economic problem started after the great depression it is important analysis of fluctuation of economics and providing remedies to the economics growth of any country.

(8). For understanding the behaviour of individual unit:--.  The study of macroeconomics is in creative demand for individual product depend upon aggregate demand in the economic thurs the study of individual unit is not possible without macroeconomics .

THE IMPORTANCE OF MACROECONOMICS 

(1):- Macroeconomics is a vital concept that considers the whole nation and works for the economy's welfare.

(2):- It is helpful for the timing of economic fluctuatios to prevent or be equipped for any financial crisis or any long-term negative situation.

(3):- The physical and monetary policies system depend entirely on the analysis of the widely held macroeconomic  conditions in the nation.

(4):- Macroeconomics mainly aims to help the government and the financial body prepare for economic stability in the country.

(5):- This stream of economics give a broder perspective of social or National issues. the one who want to contribute to the welfare of society need to the study macroeconomics.

(6):- It ensures or check the proper functioning of the country's economy and actual position.

(7):- The analysis of macroeconomic theory and issue help the economist figure of the causes and possible solution to such macro-level problems and actual position.

(8):- Dealing with various economic condition through microeconomic data open the door for growth in the country.

CONCLUSION:- The Macroeconomics is major part of economics theory and they a vital role in the country and economic theory is divided into parts microeconomic and Macroeconomics mainly.

The term Macroeconomics is a widely area of whole economics activity like national income of a country employment, unemployment inflation economic growth and development etc area covers.

Importance Of Macroeconomics

 

In this Article, The importance of macroeconomics that macroeconomics and enreaches our knowledge of the functioning or an economic by study the behaviour of national income, output investment saving, and consumption. More about it grow much light in solving the problem of unemployment, inflation, economic in stability and economic growth.

So read this article and enrich our knowledge of importance of macroeconomics. 

THE IMPORTANCE OF MACROECONOMICS

(1):- Macroeconomics is a vital concept that considers the whole nation and works for the economy's welfare.

(2):- It is helpful for the timing of economic fluctuatios to prevent or be equipped for any financial crisis or any long-term negative situation.

(3):- The physical and monetary policies system depend entirely on the analysis of the widely held macroeconomic  conditions in the nation.

(4):- Macroeconomics mainly aims to help the government and the financial body prepare for economic stability in the country.

(5):- This stream of economics give a broder perspective of social or National issues. the one who want to contribute to the welfare of society need to the study macroeconomics.

(6):- It ensures or check the proper functioning of the country's economy and actual position.

(7):- The analysis of macroeconomic theory and issue help the economist figure of the causes and possible solution to such macro-level problems and actual position.

(8):- Dealing with various economic condition through microeconomic data open the door for growth in the country.