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Macroeconomic Theory by ML Jhingan pdf 88: A Critical Review and Evaluation of the Book



Macroeconomic Theory by ML Jhingan pdf 88: A Comprehensive Review




Macroeconomic theory is a branch of economics that studies the behavior and performance of an economy as a whole. It analyzes the aggregate variables such as national income, output, employment, inflation, interest rates, exchange rates, and balance of payments. Macroeconomic theory also examines the causes and effects of economic fluctuations, growth, and development, as well as the role and impact of macroeconomic policies.




Macroeconomic Theory By Ml Jhingan Pdf 88



One of the most popular and widely used textbooks on macroeconomic theory is Macroeconomic Theory by ML Jhingan. This book was first published in 1975 and has been revised and updated several times since then. The latest edition, which is the 12th edition, was published in 2010 by Vrinda Publications. The book covers all the major topics and concepts in macroeconomic theory with clarity and rigor. It also provides numerous examples, diagrams, tables, and exercises to help students understand and apply the theories.


In this article, we will provide a comprehensive review of Macroeconomic Theory by ML Jhingan pdf 88. We will give a brief introduction to the author, the main content of the book, and a chapter-wise summary of the book. We will also highlight some of the strengths and weaknesses of the book, as well as some suggestions for improvement. Finally, we will conclude with some FAQs about the book.


Introduction




What is macroeconomic theory?




Macroeconomic theory is a set of views about the way the economy works at the aggregate level. It tries to explain how different factors such as consumption, investment, government spending, taxation, money supply, interest rates, exchange rates, and international trade affect the level and growth of national income, output, employment, prices, and balance of payments. Macroeconomic theory also tries to understand how economic agents such as households, firms, banks, and governments make decisions and interact with each other in various markets.


Macroeconomic theory can be divided into two main branches: classical macroeconomics and Keynesian macroeconomics. Classical macroeconomics is based on the assumptions that markets are perfectly competitive, prices are flexible, expectations are rational, and output is determined by supply-side factors such as technology and capital stock. Classical macroeconomics argues that the economy tends to operate at full employment and potential output in the long run, and that any deviations from this equilibrium are temporary and self-correcting. Classical macroeconomics also advocates for a limited role of government intervention in the economy.


Keynesian macroeconomics is based on the assumptions that markets are imperfectly competitive, prices are sticky, expectations are adaptive, and output is determined by demand-side factors such as consumption, investment, and government spending. Keynesian macroeconomics argues that the economy can experience persistent and involuntary unemployment and output gaps in the short run, and that these problems can be solved by active fiscal and monetary policies. Keynesian macroeconomics also emphasizes the importance of aggregate demand management and stabilization policies.


Who is ML Jhingan?




ML Jhingan is a renowned Indian economist and author of several books on economics. He was born in 1932 in Lahore, Pakistan, and obtained his MA and PhD degrees in economics from Delhi School of Economics. He has taught economics at various universities and institutions in India and abroad, such as Delhi University, Jawaharlal Nehru University, Indian Institute of Foreign Trade, University of Malaya, University of Zambia, and University of Botswana. He has also served as a consultant to various national and international organizations, such as the Planning Commission of India, the World Bank, the IMF, the UNDP, and the Commonwealth Secretariat.


ML Jhingan has written more than 20 books on various topics in economics, such as microeconomics, macroeconomics, international economics, development economics, monetary economics, public finance, and Indian economy. Some of his most famous books are The Economics of Development and Planning, International Economics, Money, Banking, International Trade and Public Finance, The Theory of Economic Integration, The Theory of Economic Growth, and Macroeconomic Theory. He has also published numerous articles and papers in reputed journals and magazines. He has received several awards and honors for his contributions to economics, such as the VKRV Rao Award, the VKRV Rao Prize, the Amartya Sen Award, and the Padma Shri.


What is the main content of the book?




Macroeconomic Theory by ML Jhingan is a comprehensive textbook on macroeconomic theory that covers both classical and Keynesian approaches. The book consists of 23 chapters that are organized into six parts. The first part deals with the basic concepts and tools of macroeconomic analysis, such as national income and economic welfare, national income accounting and circular flow of income, Say's law of market and effective demand, consumption function and saving function, investment function and multiplier, foreign trade multiplier and super multiplier, national income determination and Keynesian theory of income and employment. The second part deals with the theories of money and interest rates, such as supply of money and central banking, demand for money and interest rate determination, real balance effect or Pigou effect, wage-price flexibility or classical dichotomy. The third part deals with the theories of inflation and business cycles, such as inflation: causes, effects and policies, business cycles: theories and policies. The fourth part deals with the theories of economic growth and development, such as Harrod-Domar models of growth, Solow-Swan growth model or neoclassical growth model, endogenous growth theory or new growth theory, steady state growth and golden rule of accumulation. The fifth part deals with the theories of macroeconomic policy, such as monetary policy: objectives and instruments, fiscal policy: objectives and instruments, IS-LM model or general equilibrium analysis, supply-side economics or new classical macroeconomics, rational expectations hypothesis or new classical critique, real business cycle theory or new classical synthesis, new Keynesian economics or new Keynesian synthesis. The sixth part deals with the theories of balance of payments and exchange rates such as balance of payments: concepts and components, balance of payments policies: devaluation and expenditure switching, foreign exchange rate: determination and adjustment, foreign exchange rate policy: fixed and flexible.


Chapter-wise summary of the book




Chapter 1: National Income and Economic Welfare




Definition and measurement of national income




National income is defined as the total value of all final goods and services produced in an economy during a given period of time, usually a year. It can be measured by three methods: product method, income method, and expenditure method. The product method measures national income by adding up the value added by all producing units in an economy. The income method measures national income by adding up the incomes received by all factors of production in an economy. The expenditure method measures national income by adding up the expenditures made by all sectors in an economy.


Concepts of economic welfare and social welfare function




Economic welfare is defined as the level of well-being or satisfaction derived from the consumption of goods and services in an economy. It can be measured by various indicators, such as gross domestic product (GDP), gross national product (GNP), net national product (NNP), personal income (PI), Limitations of national income as a measure of welfare




National income, however measured, has some limitations as a measure of economic welfare. Some of these limitations are:


  • National income does not account for the distribution of income among different groups and individuals in an economy. A high national income may be accompanied by a high degree of inequality and poverty.



  • National income does not account for the non-market activities that contribute to welfare, such as household work, leisure, volunteer work, and environmental services.



  • National income does not account for the quality and variety of goods and services produced and consumed in an economy. A higher quantity of output may not necessarily imply a higher quality of life.



  • National income does not account for the externalities or spillover effects that arise from production and consumption activities, such as pollution, congestion, noise, and health hazards.



  • National income does not account for the depreciation or depletion of natural and human capital that may result from production and consumption activities, such as soil erosion, deforestation, resource exhaustion, and human capital loss.



Therefore, national income should be adjusted for these factors to obtain a more accurate measure of economic welfare. Some of the alternative measures of economic welfare are:


  • Green GDP or environmentally adjusted GDP, which subtracts the environmental costs from GDP.



  • Genuine progress indicator (GPI) or sustainable net benefit index (SNBI), which adds the value of non-market activities and subtracts the costs of inequality, crime, pollution, and resource depletion from GDP.



  • Human development index (HDI) or quality of life index (QLI), which combines GDP per capita with indicators of health, education, and life expectancy.



  • Gross national happiness (GNH) or happiness index (HI), which measures the subjective well-being or happiness of people based on various dimensions such as psychological well-being, health, education, culture, governance, ecology, and living standards.



Chapter 2: National Income Accounting and Circular Flow of Income




Methods of national income accounting




National income accounting is a system of recording and measuring the economic transactions that take place in an economy during a given period of time. It provides a comprehensive and consistent framework for estimating national income and its components by using various accounts and identities. The main methods of national income accounting are:


  • The product method or value added method, which measures national income by adding up the value added by all producing units in an economy. Value added is defined as the difference between the value of output and the value of intermediate inputs used in production. The product method uses the following identity: GDP = GVA + taxes on products - subsidies on products, where GVA is gross value added.



  • The income method or factor cost method, which measures national income by adding up the incomes received by all factors of production in an economy. Factor incomes include wages and salaries, profits and dividends, interest and rent. The income method uses the following identity: GDP = GNI + net primary income from abroad - consumption of fixed capital - net taxes on production and imports + statistical discrepancy, where GNI is gross national income.



investment by firms, government spending, and net exports by the foreign sector. The expenditure method uses the following identity: GDP = C + I + G + (X - M), where C is consumption, I is investment, G is government spending, X is exports, and M is imports.


All these methods should yield the same estimate of national income, as long as there are no errors or omissions in the data. However, in practice, there may be some discrepancies due to differences in sources, methods, definitions, and coverage of the data. Therefore, a statistical discrepancy term is added or subtracted to balance the accounts.


Circular flow of income in a closed and open economy




The circular flow of income is a simplified model that shows how income flows between different sectors and agents in an economy. It illustrates the interdependence and interrelation of production, income, and expenditure in an economy. There are two types of circular flow models: closed economy and open economy.


A closed economy is an economy that does not have any trade or financial transactions with the rest of the world. It has only two sectors: households and firms. Households supply factors of production (labor, capital, land, and entrepreneurship) to firms and receive factor incomes (wages, profits, interest, and rent) in return. Firms produce goods and services and sell them to households and receive revenues in return. Households spend their incomes on goods and services and save the rest. Firms use their revenues to pay for factors of production and invest the rest. The circular flow of income in a closed economy can be shown as follows:


An open economy is an economy that has trade and financial transactions with the rest of the world. It has four sectors: households, firms, government, and foreign sector. Households supply factors of production to firms and receive factor incomes in return. Firms produce goods and services and sell them to households, government, and foreign sector and receive revenues in return. Households spend their incomes on goods and services from domestic and foreign markets and save the rest. Firms use their revenues to pay for factors of production from domestic and foreign markets and invest the rest. Government collects taxes from households and firms and spends them on public goods and services from domestic and foreign markets. Foreign sector buys goods and