<h5 id="11-emergence-of-macroeconomics">1.1 Emergence of Macroeconomics</h5> <ul> <li>Macroeconomics emerged as a separate branch of economics after John Maynard Keynes published his book, “The General Theory of Employment, Interest and Money” in 1936.</li> <li>The classical tradition, which believed that all laborers who are ready to work will find employment and all factories will work at their full capacity, was the dominant thinking in economics before Keynes.</li> <li>The Great Depression of 1929 caused a significant fall in output and employment levels in Europe and North America, leading to low demand for goods, idle factories, and high unemployment.</li> <li>The unemployment rate is defined as the number of people who are not working and are looking for jobs divided by the total number of people who are working or looking for jobs.</li> <li>Keynes’ book was an attempt to theorize and explain long-lasting unemployment, examining the economy in its entirety and the interdependence of different sectors, leading to the birth of macroeconomics.</li> </ul> <p>======</p> <h5 id="12-context-of-the-present-book-of-macroeconomics">1.2 Context of the Present Book of Macroeconomics</h5> <ul> <li>A capitalist economy is defined by the private ownership of means of production, production for market sale, and wage labor.</li> <li>In a capitalist country, production is carried out by capitalist enterprises, which use capital, natural resources, and labor to produce output. The revenue earned from selling output is then distributed as rent, interest, wages, and profit.</li> <li>The profit is often reinvested in the enterprise to buy new machinery or build new factories, which is referred to as investment expenditure.</li> <li>The major sectors in a capitalist economy are firms, government, and the household sector. The household sector consists of individuals who make consumption decisions, save, and pay taxes.</li> <li>The external sector is the fourth major sector, which includes exports (goods sold to other countries) and imports (goods bought from other countries), as well as foreign capital flows.</li> </ul> <p>======</p>