Presentation OF B. COMM UPDATED [Autosaved].pptx

principles of macroeconomics

1. Presentation of Principles of Macroeconomics This Presentation will be given by the following members Muneeb Ahmad Manj Fatima Naeem Waleed Raza Zunaira BiBi Nayab Afzal Warda Asghar Ameer Saeed

2. Concept & Various of Money Medium of Exchange : Money facilitates the exchange of goods and services by acting as a widely accepted medium for transactions Unit of Account : Money provides a standard unit of measurement for the value of goods and services . Store of Value : Money serves as a store of value, allowing individuals to save purchasing power over time. Types

3. Functions of Money Medium of Exchange : Money facilitates transactions by acting as a universally accepted medium for the exchange of goods and services. Unit of Account : Money provides a common measure of value for goods and services. Store of Value : Money serves as a store of value, allowing individuals to save purchasing power over time. Standard of Deferred Payment : Money allows for transactions to be conducted with the understanding that payments can be postponed to a future date. Liquidity : Money is highly liquid, meaning it can be quickly converted into goods or services. Measure of Value : Money provides a standard unit of measurement for economic value.

4. Quantity Theory of Money The Quantity Theory of Money is an economic theory that explores the relationship between the quantity of money in an economy and key macroeconomic variables, particularly the price level. The basic form of the quantity equation is: M.V = P.T Principles of Theory of Money Irving Fisher's Equation of Exchange: The quantity equation is often associated with the American economist Irving Fisher, who formulated it in the early 20th century. Assumption of Constant Velocity: The theory assumes that the velocity of money remains relatively constant in the short run. Long-Run Implications: In the long run, changes in the money supply are believed to primarily affect the price level rather than real output or employment. Monetary Neutrality: The Quantity Theory implies the concept of monetary neutrality, suggesting that changes in the money supply do not affect real variables (such as output and employment) in the long run. Friedman's Version: Economist Milton Friedman, in the mid-20th century, made significant contributions to the Quantity Theory of Money. Application to Inflation: The Quantity Theory is often invoked to explain inflation. Inflation, according to this theory, is primarily a monetary phenomenon.

5. Money Relevance in Real World

6. Classical Theory of International Trade Here are key concepts and principles of the Classical Theory of International Trade: Absolute Advantage : I ntroduced by Adam Smith in his work "The Wealth of Nations," absolute advantage refers to a country's ability to produce a good more efficiently than another country, using fewer resources. According to Smith, countries should specialize in the production of goods in which they have an absolute advantage and trade these goods with other countries. Comparative Advantage: Developed by David Ricardo in his theory of comparative advantage, this concept extends the idea of specialization. Comparative advantage occurs when a country has a lower opportunity cost of producing a good relative to another country. Opportunity Cost: The Classical Theory emphasizes opportunity cost as a key determinant of comparative advantage. The country with a lower opportunity cost in the production of a good has a comparative advantage in that good. Benefits of International Trade: The Classical Theory asserts that international trade allows countries to achieve higher levels of efficiency and overall economic welfare. Through specialization in the production of goods where they have a comparative advantage, countries can maximize their output and resource utilization.

7. Continued Trade Balances: Classical economists were generally less concerned about trade balances. They argued that trade balances would naturally adjust over time as countries specialized in the production of goods in which they had a comparative advantage. Labor Theory of Value: The Classical Theory was developed during a time when the Labor Theory of Value, associating the value of goods with the amount of labor required for their production, was prominent. Assumptions: The Classical Theory often assumes full employment of resources in both countriesIt assumes constant costs of production and that resources are mobile within a country. Limitations and Criticisms: Critics argue that the Classical Theory oversimplifies by not considering differences in factor endowments (such as capital and labor) between countries.

8. Modern Theory Of International Trade O-H Theoerm The Modern Theory is also referred to as the Heckscher-Ohlin theory or the factor endowment theory . This theory states that a country’s exports depend on its resource endowments. These theories focus on factors like Comparative, advantages, economies of scale, and the role of resources and technology in determining patterns of trade between countries.

9. Advantages & Disadvantages of This Theory

10. Continued by Ameer Saeed The theories of Smith and Ricardo didn’t help countries determine which products would give a country an advantage. Both theories assumed that free and open markets would lead countries and producers to determine which goods they could produce more efficiently. In the early 1900s, two Swedish economists, Eli Heckscher, and Bertil Ohlin, focused their attention on how a country could gain comparative advantage by producing products that utilized factors that were in abundance in the country. Their theory is based on a country’s production factors—land, labor, and capital, which provide the funds for investment in plants and equipment. They determined that the cost of any factor or resource was a function of supply and demand. Factors that were in great supply relative to demand would be cheaper; factors in great demand relative to supply would be more expensive. Their theory also called the  factor proportions theory , stated that countries would produce and export goods that required resources or factors that were in great supply and, therefore, cheaper production factors. In contrast, countries would import goods that required resources that were in short supply, but higher demand. For example, China and India are home to cheap, large pools of labor. Hence these countries have become the optimal locations for labor-intensive industries like textiles and garments.

11. Economic Integration & Regional Corporation An agreement amongst countries in a geographical region to reduce or remove the tariff or non-tariff barriers to the free flow of goods, services, and factors of production between each other. For example: SAARC (South Asian Association for Regional Corporation) Fi ve levels of regional economic integration FTA (Free Trade Area) CU (Custom Union) CM (Common Market) EU (Economic Union) PU (Political Union)

12. Level’s of Regional Economic Integration

13. World Trade Organization The World Trade Organization (WTO) is an international organization that deals with the global rules of trade between nations. Established on January 1, 1995, the WTO replaced the General Agreement on Tariffs and Trade (GATT) as the primary international institution overseeing trade negotiations and dispute resolution. Geneva, Switzerland , where the WTO headquarters is located.

14. Objectives .

15. Roles

16. THANK YOU……

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