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CHAPTER 1 : INTRODUCTION

1. WHAT IS ECONOMICS(CONVENTIONAL VS ISLAMIC)

2. WHAT IS THE DIFFERENCE BETWEEN

MACRO & MICRO

3. MACROECONOMIC OBJECTIVE

(CONVENTIONAL VS ISLAMIC)

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CONVENTIONAL

2 problems in economy

i. Productive resources which to produce g & s are limitedii. Human wants for g & s are unlimited

Economy has to decide how to use these resources efficiently

in order to attain the max possible satisfaction for themembers

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DEFINITION OF ECONOMICS

ISLAMIC

Social science which studies the economics problemsof

people imbued with islamic valuesM A Mannan

Study of how man can achieve al-falahthrough his control,

ownership & uses of these worldly resources based on theconcepts of cooperation & partnershipAkram Khan

A study used by man to fulfill his as well as societys wants

according to syariah principleAmir Mohd al-Faysal as Saud

A study of human activities for obtain, manage & use the

economic resourcesaccording to the syariah principlesfor

the betterment of human life both materially, spiritually in order

to achieve the blessing of Allah (al-falah)Islamics

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ISLAMIC

Ultimate objective in Islamto achieve al-Falah

Meanachieve success in this world & hereafter

i.e guarantee given by Allah

How to achieve al-falah?

- All activities & DM are carried out based on philosophicfoundation of the Islamic economic system ie

i) Hablum min Allah

ii) Hablum minan nas

iii) r/ship man vs nature & surroundingsiv) meaning of his living in this world

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DIFFERENCES : CONVENTIONAL VS ISLAMIC

Conventional Islamic

Eco objto reach max o/put

with the use of scarce resources

Tends to reach the same obj as

conventional but constrained

by the islamic ethical

philosophy

Consumermax satisfaction

Producermax

Through 4 concept ie tauhid,

rububiyyah, khalifah, tazkiyah

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DIFFERENCES : MICRO VS MACROECONOMICS

Microeconomics Macroeconomics

Part of economics that studies

indv units or economic elements

in the process of DM

ie focus on small economic units

Studies the economy as a whole

or deals with the aggregate

Seeks to understand the big

picture rather than the detailedof indv choice

in price of sugar

Production of canned pineapples

National income

Economic growth

Inflation

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MACROECONOMIC OBJECTIVE

DIFFERENCES : CONVENTIONAL VS ISLAMIC

Conventional Islamic

Achieve full employment Max employment

Achieve price stability Achieve

equitable distribution of

income

Achieve social justice &

distribution of income & health

Achieve economic growth Achieve optimal rate of

economic growth

Achieve in foreign sector Universal education

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OBJECTIVE OF CONVENTIOAL MACROECON

i) FE

- meaning

- L force

- unemployment rate

ii) P stability- meaning

- inflation rate

- 3 main problems associated with inflation rate

a) redistribution effect (real vs fixed income )b) uncertainty about future price

c) money looses its function as medium of

exchange

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OBJECTIVE OF CONVENTIOAL MACROECON

iii) Equitable of distribution of income

- meaning

- 2 methods

a) tax policy

b) expenditure policy

- which one is better

iv) Economic growth

- meaning & rate

- classification (actual vs potential)- factors contribute to potential economic growth

- business cycle / trade cycle

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OBJECTIVE OF CONVENTIOAL MACROECON

v) in foreign sector

- meaning

- BOPsurplus vs deficit

a

c

d

Time / year

Potential output

apeak

brecession

ctroughdexpansion

erecoveryTrade cycle

National

output

b e

BUSINESS CYCLE

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OBJECTIVE OF ISLAMIC MACROECON

i) Max job opportunities

- same as conventional

ii) social justice & distribution of income & wealth

- concept of Tauhid

- will not abuse the power & wealth given

iii) optimal econ growth

- emphasize more on human capital - moral, spiritual, material

aspect

iv) Universal education

- equal opportunity regardless their background

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