Some Basic Concepts of Macroeconomics Video Lecture | Business Economics for CA Foundation

hello and welcome to our online classes
now in this video now this is the first
video in a series of lectures on the
topic of macroeconomics now the
objective of keeping the topic of
macroeconomics
are in this course is that to understand
how the stock market works you need to
have a brief idea of how the
macroeconomic system works and the
various concepts in macro economics ok
for example you need to understand what
is GDP and what does GDP growth mean and
what impact does it have on an economy
you need to understand what is inflation
so there are several of these concepts
that you need to understand before you
become a stock market expert now before
we get into the various concepts in the
topic of macroeconomics I want you to
have a brief idea or a holistic idea of
how the economic system is shaped I want
you to be able to answer the question of
how does the economy work ok now to
understand how the economy works you
need to be able to you know first
identify the players in an economic
system ok
so for example let us consider a country
a ok like a country like India to
understand how the economic system in
country a works we need to first
recognize the players and an economic
system so who are the players in an
economic system well the three most
important players or agents in an
economic system are the governments
the households and citizens people who
are living in that country okay
and finally the firm's businesses and
corporates now mind you when I say
businesses firms and corporates I don't
just mean companies or factories or
corporations I mean any entity or
institution or organization or even
individual who is producing a certain
goods or a service of economic value
what I mean to say is that farmers who
produce you know crops or food items
they're also a part of this group that
is highlighted here on your screen
doctors teachers who aren't exactly
companies but they're also a part of
this group here because they are
producing a certain service economic
value okay so you need to realize that
so now we have established the three key
players in an economic system right let
me now introduce the fourth key player
and economic system and it is the
financial system okay the financial
system if you have seen my first lecture
series on capital markets and primary
markets I had explained there that the
financial system is an important
facilitator of flow of capital okay for
any economy capital or credit is vital
for its growth for its a of a Forex
growth and the financial system enables
capital to flow from institutions or
individuals who have accessed capital to
institutions or individuals who have who
are need of capital immediately okay so
the financial system is at the heart of
any economic system that's why it's the
middle of the these three players okay
sorry now the next left now is let us
now introduce the fifth player in
economic system the fifth player in
economic system are central banks okay
central banks now the central banks play
a very key role in an economy okay money
is a very important instrument in an
economic system in modern economies
money is a very important instrument
central banks in every country are an
autonomous institution who are mandated
by the government to control the amount
of money that is flowing in the entire
system okay so they basically control
the money supply the amount of money
that this that needs to be printed the
amount of money that is flowing in the
system is controlled by the central bank
right so these are the five key players
of an economic system now that we have
established the players of an economic
system we now need to understand the
relationship between these players okay
now when you look at these players in an
economic system or the agents in an
economic system it should be easy for
you to understand that it is this group
the businesses the firms and the
corporates are they or any individual
which is producing something of economic
value is the group which produces
something in an economy they are the
producers okay now whatever they
produced produce is consumed by the
people who are living in the country the
households and citizens and by the
government's okay so the households and
the citizens they consume what is
produced by the businesses the firms in
the corporates so do the government's
the government's they spend money for
example like building roads the
government is going to look for a
contractor which build roads and will
pay the contractor to build roads to
create buildings and etc etc so this
group produces something for the economy
and it is consumed by the government's
and the households and the citizens
right now where does the labor come for
these people for this group of for this
group to
something it is of course provided by
the households and the citizens okay so
the households the citizens they provide
labor to the businesses the firms in the
corporates and in turn earn a certain
income from the this group of people
okay now
the businesses the firms in the
corporates they're producing something
which they are selling to the
governments in the households that means
they earn money via that okay so they
make certain profits the households the
citizens the households and citizens
they also earn income from the services
that they are providing the wages that
they're getting for the labor that they
provide and that is also the
government's they tax these two entities
to earn money okay so the businesses the
firm the corporates they provide tax as
corporate tax or other such the service
taxes and other such taxes the income
the households and the citizens they pay
income taxes to the governments so
that's how the households and the
citizens and the business and the
businesses are linked to the government
okay
taxes are is the source of revenue for
governments the final element that I the
final relationship that I have want to
introduce is of government transfers or
government benefits now in any society
or in any economy or in any democracy
the people of any particular country the
citizens they elect governments whereby
they mandate the government's or they
trans give the government's the
responsibility to run the country okay
now the running the country will
definitely need money and the
government's raise that money by taxing
the institutions and the people right
with this tax the government of course
pays for the administration of the
country pays for the process of
policymaking and making the laws of any
particular country but the government's
also look after the
people or the underprivileged in any
society they are also have some
responsibility towards the people that
they are governing or the country that
they are administrating okay so they
provide this service or this benefit to
the people by our government transfers
examples of government transfers are
social welfare schemes of benefit
schemes subsidies or investment in human
development for example providing free
health care to the citizens providing
free education to the citizens
so all this forms falls under the
government transfers this is how the
government transfers its resources to
the citizens and the households okay
now now we've established the economic
system system of any particular country
a now that is finally introduced the
last element in any economic system
which is the our relationship or our
business relationship with the rest of
the world as a major country as a large
country like India we obviously engage
in international trading whereby we
export and import our goods and services
to other countries okay so this is the
entire economic system right whatever
concept but we are going to talk about
in the subject of of macro economics
will be a part of this system let me
show you what are the concepts that we
are going to cover in this topic of in
the subject of macro economics we are
basically going to cover GDP inflation
deficits policies and demographics we're
going to explain these concepts to you
in the future videos
now let me give you a brief idea of each
of these topics in each of these topics
that we are going to cover in future
videos what is GDP well GDP is actually
a short form for gross domestic product
it basically measures the total
value of the goods and services produced
by any particular country so basically
it's measuring the total value of output
produced by these guys that is
highlighted on your screen okay
the next topic that we're going to cover
is inflation what is inflation well as I
have said central bank's play a very
important role in an economy whereby
they control the money supply you need
to understand that money supply has a
very close relationship with prices in
an economy okay if the money supply in
any economy grows very high then the
prices of the goods and services is
likely to increase right so inflation
basically measures the price levels of
goods and services so when we are going
to talk about inflation we will show you
what exactly it means and what role
central banks play in controlling
inflation in a country okay the next
thing that we are going to talk about is
deficits now deficits as the word
suggests is some kind of a shortage
right there basically two kinds of
shortages one is the shortage of money
by governments that is called fiscal
deficit and the shortage of deficit in
our Export Import area so that is called
trade deficit if we import more than we
export then we are paying more money to
the rest of the world than what we are
receiving ok so the value of our imports
is greater than the value of exports
we're actually paying money to the rest
of the world so that's a trade deficit
and it is closely related to something
called current account deficit so we
will cover the two deficits in this
subject of macroeconomics the next thing
is policies now when we say policies we
mean the the the rules or the guidelines
or the decisions that governments take
in running the country okay
in claiming the laws of the country
and the decisions that the central banks
take in controlling the money supply in
the country which in effect controls the
price levels in the country so we're
going to talk about policies finally we
going to talk about demographics well
what is demographics undoubtedly the
most important constituent or part of
any economic system or any country are
its people it's the citizens who are the
most crucial part of any economic system
a country without any people is not
going to produce anything of course
okay so demographics tries to look at
the condition of the people in any
society or in any country okay by
looking at the demographics we can make
certain assumptions of what this entire
economy is going to do in the near term
for example India is a very young
country that means the average age of
Indians is very low now this is
extremely beneficial it is going to be
extremely beneficial in the long run
that means because we have a lot of
people to provide labor and with lots of
labor we will most likely produce lots
of goods and services
this section will produce lots of goods
and services so with lots of goods and
services to produce the people of this
country will have lots to consume ok so
this is in a way beneficial so we will
look at that aspect of an economic
system of a macroeconomic system when we
talk about demographics
I hope this introductory course or if
this introductory lecture has been
informative I will keep coming back to
this diagram when I'm explaining future
concepts or the concepts which I have
listed on this side of the screen till
then good bye good luck