Chapter Two of MacEwan's The World Bank Series dissects the difference between micro and macro economic theory. MacEwan starts out with a simple model, the use or endowment effect, a perfect money flow solution for all flows, a perfect demand and supply dynamic which is a general equilibrium. I won't get into all the theory behind this model here, but you can certainly see the merit of the example in the general discussion of why the perfect money flow does not apply to some circumstances.
The second chapter of MacEwan's The World Bank series dissects national income forecasting. This is basically a statistical test that attempts to forecast national income. If you look at the two different ways of predicting national income, one of them being perfect supply and demand, and the other just being a random distribution, there are obvious problems with either method. With a perfect demand and supply theory, it is possible to say that everybody has the same potential income and if we try and measure that potential income through taxes and transfers, it will still be very difficult to make any sort of general or abstract calculation.
Now let's take a look at the other side of the national income forecasting. In the previous chapter the macroeconomists made use of some four factors to attempt to estimate national income. The first factor was production and consumption, the second was an investment, the third was trade and the last was durable goods production. If we assume that the production and consumption shares are fairly independent, then the other four factors don't matter very much. Unfortunately, if we take a national income forecast based on the assumption these other four factors are important, then the estimates become very sensitive to certain economic variables.
For instance, you can estimate the output gap between stock and flow macroeconomics class 12. But if you take a snapshot in time of the differences in gross domestic product across economies, you find that it varies quite significantly between countries. This is because GDP per capita changes rapidly from country to country, as measured by PPPs. And the correlation between GDP per capita growth rates and real gross domestic product growth rates is negative. In short, depending on the macroeconomic policies of a country, there can be a big difference between stock and flow macroeconomics class 12. This gives us another important clue towards understanding how important it is to pay attention to national income forecasting, even when the economic indicators used are based on stock and flow macroeconomics class 12.
Let us now move on to another example of a chapter dealing with national income forecasting. The story goes like this: A farmer in eastern India is very rich. His crop yields are above average and his farming industry is growing quickly. However, unemployment is very high and many people are looking for jobs in the nearby cities or even traveling to other regions of the country for employment.
The situation is further worsened by the heavy rainfall, which hits the agricultural sector in the indeed, and destroys crops. The government must take immediate action to rebuild the infrastructure of the agricultural region. However, what the farmer needs is information on the local weather conditions, so that he can make good use of his crops in the forthcoming sowing season, instead of just picking whatever is available in the store room. This is where the local weather data is of great importance to him.