Page 15 - DECO402_Macro Economics

Macroeconomic Theory

Notes Exchange rate (in international market the value of one country’s currency to other country’s currency)
is an another parameter of monetary policy by which all levels of economic activities is effected.
Favourable exchange rate, with comparison to other countries increase in value of currency of own
countries, is not a good sign. For those economies that wants to made his development process rapid
by export promotion, this is certainly not right. The meaning of increasing in value of Indian currency
that by one American dollar in Indian market will be purchased less goods and services form prior.
In other words, now the demand of Indian goods in international market will be necessarily less.

Did You Know? In macroeconomics, function of money and theories related to that is
studied.

Self Assessment
State whether the following statements are True and False.
7. In macroeconomics studies trade among different countries also.
8. Changing of demand and supply of money effects employment level much.
9. In macroeconomics studies employment and unemployment related problems.
10. Growth and development are not the main factor of macroeconomics or macroeconomics
related policies.

1.4 Macroeconomic Targets and Instruments

Above mentioned macroeconomics problems generally divided into (1) target of macro economics
and (2) macroeconomics’ policy. Growth and development, employment and economic stability etc.
problems are the target of macroeconomics.
Each nations target is get high rate of growth and development for the improvement of standard of
living of own countrymen. A nation tries to change growth process into development process so that
in growth benefits can be distributed justificably. Its this endeavour also that development process
made a sustainable process, so that future generation’s development potentialities do not less by any
means. The target of a country to maximize rate of participation, so that unemployment rate can be
done minimal. Besides this, the target of each nation is to make rigid development process, means
keep minimal economy inflationary and disinflationary pressure.
For the attainment of targets policy instrument in needed. These important policy instrument works
as fiscal and monetary policies. These policy are formulated by government, however any type of
political system may be. This is remarkable regarding this that macroeconomics related policies are
compliment to each other, rather alternative to each other. Fiscal and monetary both instruments uses
together. Macroeconomics fixed target attaing government determines the appropriate importance
of fiscal and monetary instrument.

 According to Lipsey and Chrystal- “The macroeconomics policy problem is to choose appropriate
values of policy instruments in order to achieve the best possible combination of the outcomes of
the targets. This is a continually changing problem because the target are perpetually being affected
by shocks from various parts of the world economy.”

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