GDP,Business cycle & Inflation.

1. PRESENTED BY –
Aatur Porwal
Shubham Sharma
IMPACT OF MACROIMPACT OF MACRO
ECONOMIC FACTORSECONOMIC FACTORS
GROSS DOMESTIC PRODUCTGROSS DOMESTIC PRODUCT
(GDP), BUSINESS CYCLE &(GDP), BUSINESS CYCLE &
INFLATIONINFLATION

2. INDEXINDEX
 GDP
-INTRODUCTION
-HOWTO CALCULATE GDP
-POINTSTO REMEMBER
-GRAPH
 BUSINESS CYCLE
-INTRODUCTION
-PHASES OF BUSINESS CYCLE
-CAUSES OF BUSINESS CYCLE
-HOWTO MEASURE BUSUNESS CYCLE
 INFLATION
-INTRODUCTION
-CAUSES OF INFLATION
-CONSIQUENCES AND MEASUREMENTS
-INFLATION RATES IN INDIA

3. INTRODUCTION TO GROSSINTRODUCTION TO GROSS
DOMESTIC PRODUCTDOMESTIC PRODUCT
 GDP is the market value of all officially recognized final
goods & services product within a country in a given
period of time.
 The GDP signifies the overall economic activity of an
economy.
 The GDP value by the equation is called as nominal or
current GDP.
 New way to comparing GDP is PPP.

4. HOW TO CALCULATE GDPHOW TO CALCULATE GDP
GDP = C + I + G + (X-M)
Where,
“C” stands for consumption which includes personal expenditures pertaining to food, households,
medical expenses, rent, etc.
“I” stands for business investment as capital which includes construction of a new mine, purchase of
machinery and equipment for a factory, purchase of software, expenditure on new houses, buying
goods and services but investments on financial products is not included as it falls under savings.
“G” stands for the total government expenditures on final goods and services which includes
investment expenditure by the government, purchase of weapons for the military, and salaries of
public servants.
“X” stands for gross exports which includes all goods and services produced for overseas consumption.
“M” stands for gross imports which includes any goods or services imported for consumption and it
should be deducted to prevent from calculating foreign supply as domestic supply

5. POINTS TO REMEMBERPOINTS TO REMEMBER
 There are different sectors contributing to the GDP in India such as
agriculture, textile, manufacturing, information technology,
telecommunication, petroleum, etc.
 The different sectors contributing to the India GDP are classified into three
segments, such as primary or agriculture sector, secondary sector or
manufacturing sector, and tertiary or service sector.
 With the introduction of the digital era, Indian economy has huge scopes in
the future to become one of the leading economies in the world.
 India at present is one of the biggest exporter of highly skilled labor to
different countries.
 The new sectors such as pharmaceuticals, nanotechnology, biotechnology,
telecommunication, aviation, manufacturing, shipbuilding, and tourism
would experience very high rate of growth.

7. INTRODUCTION TO BUSINESSINTRODUCTION TO BUSINESS
CYCLECYCLE
 A business cycle refers to periods of expansion and
contraction. A peak is the high point following a period of
economic expansion. A trough is the low point following a
period of economic decline.
 The recurring and fluctuating levels of economic activity
that an economy experiences over a long period of time.

8. PHASES OF BUSINESS CYCLEPHASES OF BUSINESS CYCLE
 Expansion: Increase in
production and prices, low
interests rates.
 Crisis: Stock exchange
crashes and multiple
bankruptcies of the firm
occurs.
 Recession: Drops in
prices and in output high
interest rates.
 Recovery/Revival:
Stocks recover because of the
fall in prices and incomes.

10. CAUSES OF BUSINESS CYCLECAUSES OF BUSINESS CYCLE
INTERNAL FACTORS EXTERNAL FACTORS
1. Consumption: When consumer spending
increases, businesses will increase production-
causing them to hire more workers and purchase
more materials and capital goods. When
consumer spending decreases, the opposite will
occur.
2. Business investment: The purchasing of capital
goods increases the number of jobs in the
economy because people have to make those
goods. If investments increases, the economy
will grow, if investment decreases, the economy
will contract.
3. Government activity: The government can
influence the business cycle through fiscal
policy (its tax and spend policies) and monetary
policy (its control of the money supply, largely
1. Inventions and innovation: Major
changes in technology can influence
the business cycle. Usually
technological changes move the
economy in a positive direction, but
this is not always so.
2. Wars and political events: The
impact of such events on the
economy are very fact specific- in
other words, difficult to generalize
about.

11.  The business cycle is the periodic but irregular up-
and-down movements in economic activity, measured
by fluctuations in Real GDP and other
macroeconomic variables.
HOW TO CONTROL BUSINESS
CYCLE?

12. INTRODUCTIONINTRODUCTION TO INFLATIONTO INFLATION
 Inflation is defined as a sustained increase in the
price level or a fall in the value of money.
 When the level of currency of a country exceeds the level of
production, inflation occurs.
 Value of money depreciates with the occurrence of inflation.
 According to C.CROWTHER, “Inflation is State in which the
Value of Money is Falling and the Prices are rising.”
 In Economics, the Word inflation Refers to General rise in
Prices Measured against a Standard Level of Purchasing
Power.

13. CAUSES OF INFLATION
FACTORS ON DEMAND
SIDE
FACTORS ON SUPPY SIDE
o Increase in money
supply.
o Increase in disposable
income.
o Deficit financing.
o Foreign exchange
reserves.
o Rise in administered
prices.
o Erratic agriculture growth.
o Agricultural price policy.
o Inadequate industrial
growth.

14. CONSIQUENCES OF
INFLATION
MEASURES OF INFLATON
Adverse effect Of
production
Adverse effect on
distribution of income.
 Obstacle to development
Changes in relative prices
Adverse effect on the
B.O.P
1. MONETARY POLICY
• Credit Control
• Demonetization of Currency
• Issue of New Currency
•
2. Fiscal policy
• Reduction in Unnecessary Expenditure
• Increase in Taxes
• Increase in Savings
• Surplus Budgets
• Public Debt
3. Other Measures
• To Increase Production
• Rational Wage Policy
• Price Control

15. HOW IS INFLATION
MEASURED?
The 2 ways of Measuring Inflation
are -: Consumer Price Index
INFLATION RATES IN INDIA