F1/FAB ACCA (2011-2012)

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READ CAST by Hafiz Muhammad Adnan Rana The Student College at Sialkot (StuCo)

The Macro-Economic Environment

2. Macro-economic factors a) Define macro-economic policy.[1] b) Explain the main determinants of the level of business activity in the economy and how variations in the level of business activity affect individuals, households and businesses.[1] c) Explain the impact of economic issues on the individual, the household and the business: [1] i) inflation ii) unemployment iii) stagnation iv) international payments disequilibrium. d) Describe the main types of economic policy that may be implemented by government and supra-national bodies to maximise economic welfare.[1] e) Recognise the impact of fiscal and monetary policy measures on the individual, the household and businesses.[1] Exam Context Macro-economic factors might be considered a peripheral part of the syllabus, but the pilot paper contained nine marks for questions on this topic. Qualification Context An understanding of this topic will assist with P3 (Business Analysis). But we must appreciate that we are accountants not economists. Business Context
Macroeconomic factors affect all aspects of managing organizations as the economic climate alters consumers demand requirements as well as the price and availability of raw materials and the labour force. Newspaper reading is encouraged at this stage (www.br.com) Business Recorder Newspaper

ECO2NOMICS is bad
The study of production, distribution and consumption of goods and services.

Q Injections into the economy are: A Consumption and Investment B Investment and Government Expenditure C Investment, Government Expenditure and Export Demand D Consumption, Investment, Government Expenditure and Export Demand

Gross domestic product (GDP) is defined as "the value of all final goods and services produced in a country in 1 year"

Gross National Product (GNP) is defined as "the market value of all goods and services produced in one year by labour and property supplied by the residents of a country."

National income and output (Billions of dollars)

Period Ending

2003

Gross national product

11,063.3

Net U.S. income receipts from rest of the world

55.2

U.S. income receipts

329.1

U.S. income payments

-273.9

Gross domestic product

11,008.1

Private consumption of fixed capital

1,135.9

Government consumption of fixed capital

218.1

Statistical discrepancy

25.6

National Income

9,679.7

NDP/NNP: Net domestic product is defined as "gross domestic product (GDP) minus depreciation of capital" GDP per capita: Gross domestic product per capita is the mean value of the output produced per person, which is also the mean income.

2. Macro-economic factors a) Define macro- economic policy.[1] d) Describe the main types of economic policy that may be implemented by government and supra-national bodies to maximise economic welfare.[1] national

The branch of economics that deals with the performance, structure and behavior of the economy as a whole.

Macroeconomic is concerned with followings:

Everyone outside of Pakistan asking single question IS GNP FIT ? I Inflation rate S Spending (National Expenditures) G Growth of GDP N National Economic Trend P Productivity Levels (factors of production)

F Foreign Exchange rates I Interest rates T Tax rates

Government of Pakistan will have similar macroeconomic aims: Economic Growth (people have happier life) Low Inflation Low Un-employment Balance of Payment (Stable Foreign Exchange Rates, Dr and Cr of National Accounts equal)

2. Macro-economic factors b) Explain the main determinants of the level of business

activity in the economy and how variations in the level of business activity affect individuals, households and businesses.[1]

SADLY Pakistan is like a CAGE for investors to invest money. S Supply of Finance (House, Car, CAPEX) A Aggregate Demand (Business, Individual, Household) D - Advancement in Factors of Production (Skills and Education Level HSBC) C Confidence (Vicious Circle Fear of losing job will Preference Theory) A Awareness (Exhibitions) G Government Policy (Spending, Contraction) E Exchange rate movement (Pak Rupee getting stronger or weaker)

Q Which one of the following would cause a fall in the level of aggregate demand in an economy. A decrease in the level of imports C Decrease in Govt Spending B fall in the propensity to save D Decrease in income tax