Introduction to Macro Economics – Nature, Scope, Importance & More
The term ‘Macro’ has been derived from a Greek word ‘Macros’ meaning ‘large’. Thus, Macro Economics is the study and analysis of an economy as a whole.
Macro Economics involves the study of:
the behaviour of an economic system as a whole
aggregates and averages covering the entire economy
behaviour of large aggregators such as:
Total Employment
National Product
National Income
Price-Levels etc.
Macro Economics deals with problems such as:
Unemployment in the country
Inflation/Deflation
Economic Growth
International Trade
National Output
National Expenditure
Level of Savings & Investment
Scope of Macro Economics:
The scope of Macro Economics lies in the study of analysis of the following:
Theory of Employment
Income Theory
Theory of Price level
Theory of Growth
Distribution Theory
Theory of National Income
Nature/Characteristics of Macro Economics:
It is a study of national aggregates
It studies economic growth
It ignores individual differences between aggregates
Importance of Macro Economics:
It helps to understand working of the whole economy
It helps in formulation of economic policies
It studies and analyses growth and development in an economy
It helps in development of micro-economic theories
Difference between Micro Economics and Macro Economics Micro EconomicsMacro EconomicsMeaningIt studies individual units of an economyIt studies the economy as a wholeField of StudyIt studies individual economic units such as: a consumer, a firm, a household, an industry, a commodity etc.It studies national aggregates such as: national income, national output, general price level, level of employment etc.ProblemsIt deals with micro problems such as determination of: price of a commodity, a factor of production, satisfaction of a consumer etc.It deals with problems at a macro level like problems of employment, trade cycles, international trade, economic growth etc.NatureIt is based on disaggregation of unitsIt is based on aggregation of units It considers individual differences between different unitsIt does not consider individual differences between aggregatesObjectivesMaximize UtilityFull Employment Maximize ProfitsPrice Stability Minimize CostsEconomic Growth Favourable Balance of Payment situationMethodologyStatic Analysis i.e.
Does not explain the time element
Equilibrium conditions are measured at a particular period.Dynamic Analysis i.e. It is based on time lags, rates of change, past and expected values of variables
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