Macro Economics
Macro economics is a study of the economy as a whole, and the variables
that control the macro-economy. The study of government policy meant to
control and stabilize the economy over time, that is, to
reduce fluctuations in the economy is known as macro economics. Macro
economics also includes the study of monetary policy, fiscal policy, and
supply-side economics.
The term Macro is derived from the Greek word “MAKROS” which means
large. It deals with the aggregates such as national income, output,
employment and the general price level etc, therefore it is called the
Aggregative Economics.
According to Shapiro, “Macroeconomics deals with the functioning of the
economy as a whole”. According to Boulding, “Macroeconomics deals not
with individual quantities as such, but with aggregates of these quantities,
not with individual income but with national income, not with individual
output but with national output”. Ackley defines Macro Economics as “Macro
Economics deals with economic affairs ‘in the large, it concerns the overall
dimensions of economic life. It looks at the total size and shape and
functioning of the elephant of economic experience, rather than working of
articulation or dimensions of the individual parts. It studies the character of
the forest, independently of the tress which compose it.”
Why macroeconomics and not only microeconomics?
The whole is more complex than the sum of independent parts. It is not
possible to describe an economy by forming models for all firms and persons
and all their cross-effects. Macroeconomics investigates aggregate behavior
by imposing simplifying assumptions (“assume there are many identical
firms that produce the same good”) but without abstracting from the
essential features. These assumptions are used in order to build
macroeconomic models. Typically, such models
have three aspects: the ‘story’, the mathematical model, and a graphical
representation.
Scope of Macroeconomics
The scope of macro economics has been explained as under:-
1. Theory of National Income:-Macro economics studies the concept of
national income,
, its different elements, methods of its measurement and social accounting.
2. Theory of Employment:-It studies the problems of employment and
unemployment.
There are different factors which determine employment. They are like
effective demand,
aggregate demand, aggregate supply, total consumption, total savings and
total
investment etc.
3. Marco Theory of distribution:-There are macro economic theories of
distribution.
These theories try to explain how the national output is distributed among
the factors of
production.
4. Economic development:-.Economic development is a long run process. In
it, we analyze
the problems and theories of development.
5. Theory of International Trade:-It also studies principles determining trade
among
Different countries. Tariff’s protection and free-trade polices fall under foreign
trade.
6. Theory of Money: - Changes in demand and supply of money effect level of
Employment. Therefore, under macro economics functions of money and
theories relating
To money are studied.
7. Theory of Business Fluctuations:-It also deals with the fluctuations in the
level of
Employment, total expenditure, and general price level.
8. Theory of General Price Level:-A continuous rise in the price level is called
inflation. It
Distorts production. It increases inequalities in the distribution of income and
wealth. The
Macro economics is a study of the economy as a whole, and the variables
that control the macro-economy. The study of government policy meant to
control and stabilize the economy over time, that is, to
reduce fluctuations in the economy is known as macro economics. Macro
economics also includes the study of monetary policy, fiscal policy, and
supply-side economics.
The term Macro is derived from the Greek word “MAKROS” which means
large. It deals with the aggregates such as national income, output,
employment and the general price level etc, therefore it is called the
Aggregative Economics.
According to Shapiro, “Macroeconomics deals with the functioning of the
economy as a whole”. According to Boulding, “Macroeconomics deals not
with individual quantities as such, but with aggregates of these quantities,
not with individual income but with national income, not with individual
output but with national output”. Ackley defines Macro Economics as “Macro
Economics deals with economic affairs ‘in the large, it concerns the overall
dimensions of economic life. It looks at the total size and shape and
functioning of the elephant of economic experience, rather than working of
articulation or dimensions of the individual parts. It studies the character of
the forest, independently of the tress which compose it.”
Why macroeconomics and not only microeconomics?
The whole is more complex than the sum of independent parts. It is not
possible to describe an economy by forming models for all firms and persons
and all their cross-effects. Macroeconomics investigates aggregate behavior
by imposing simplifying assumptions (“assume there are many identical
firms that produce the same good”) but without abstracting from the
essential features. These assumptions are used in order to build
macroeconomic models. Typically, such models
have three aspects: the ‘story’, the mathematical model, and a graphical
representation.
Scope of Macroeconomics
The scope of macro economics has been explained as under:-
1. Theory of National Income:-Macro economics studies the concept of
national income,
, its different elements, methods of its measurement and social accounting.
2. Theory of Employment:-It studies the problems of employment and
unemployment.
There are different factors which determine employment. They are like
effective demand,
aggregate demand, aggregate supply, total consumption, total savings and
total
investment etc.
3. Marco Theory of distribution:-There are macro economic theories of
distribution.
These theories try to explain how the national output is distributed among
the factors of
production.
4. Economic development:-.Economic development is a long run process. In
it, we analyze
the problems and theories of development.
5. Theory of International Trade:-It also studies principles determining trade
among
Different countries. Tariff’s protection and free-trade polices fall under foreign
trade.
6. Theory of Money: - Changes in demand and supply of money effect level of
Employment. Therefore, under macro economics functions of money and
theories relating
To money are studied.
7. Theory of Business Fluctuations:-It also deals with the fluctuations in the
level of
Employment, total expenditure, and general price level.
8. Theory of General Price Level:-A continuous rise in the price level is called
inflation. It
Distorts production. It increases inequalities in the distribution of income and
wealth. The
