Topic: Macroeconomics )

OUTLINE What is Macro Economics? Uses or importance of Macro Economics. Limitations of Macro Economics. Salient features of Macro Economics. Relation between Micro Economics and Macro Economics. Difference between Micro Economics and Macro Economics.

What is Macro Economics? The term ‘Macro’ in English language has its origin in the Greek language term ‘Makros’ which means ‘Large’. Macro economics , therefore , studies economic problems from the point of view of entire economy, e.g., aggregate consumption, aggregate employment, national income, general-price level, etc. According to M.H. Spencer ,”Macro economics is concerned with the economy as a whole or large segments of it. In macro economics , attention is focussed on such problems as the level of unemployment , the rate of inflation , the nation’s total output and other matters of economy-wide significance.”

SCOPE Theory of national income Theory of general price level Theory of employment Theory of money Theory of general price level Theory of economic growth Theory of international trade

Uses of Macro Economics Helpful in understanding the functioning of an economy. Study of national income. Formulation of economic policy.

Study of trade cycles. Change in the general price-level. Economic growth.

Helpful in the study of Micro economics. Estimate of material welfare. International comparisons.

Economic planning. Inter-relationship among different sectors. Helpful in understanding Macro economic Paradoxes.

Limitations of Macro Economics Dependence on individual units. Heterogeneous units. Different effects of aggregates.

Ignores the contribution of individual units. Limited application. Ignores the contribution of individual units. The composition of structure of the aggregate is more important than the aggregate itself.

Salient features of Macro Economics Short –run nature of Macro economics. Study of the whole economy. Role of National Income.

Macro economics- General theory. Role of consumption. Macro economics- General theory. Based on practical experiences.

Role of expectations in the economies. Theory of shifting equilibrium. The crucial role of investment.

Relation between Micro and Macro Economics 1.Micro economic analysis depends on macro economic analysis. 2.Study of micro economic analysis is necessary for macroeconomic analysis.

Differences between micro and macro economics Micro economics It studies economic problems relating to a single economic unit. It studies the economic problems of all firms in an economy. It deals with the study of the behaviour of economic variables in equilibrium position. 2. It deals with the study of the behaviour of economic aggregate in disequilibrium position. Aim is to study the principles, problems & policies relating to optimum allocation of resources. 3. Aim is to study the principles, problems & policies concerning full employment & growth of resources of economy. Macro economics

Micro economics, economic units like consumers take their decisions on the basis of prices. Macro economics, decisions regarding aggregate consumption are on the basis of income. In formulating the principles, we assume other things being equal. 5. In formulating the principles, we divide economic factors into aggregates. It is assumed that there is full employment in the country. It is assumed that there is optimum allocation of the resources in the country.

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