Macroeconomics | Scope and Significance | Micro Vs Macroeconomics |

Macroeconomics | Scope and Significance | Micro Vs Macroeconomics |

 

Meaning of Macroeconomics

The word Macro in English comes from a Greek word Makros which means Large and large is read as economy as a whole in the context of Macroeconomics. Therefore, macroeconomics is that branch of economics which studies economic relationship, economic problem and economic issues at the level of economy as a whole such as growth of output, inflation in market, how government policies affect the economy and Affect of import and export on the economy.



As per M.H. Spencer, “Macroeconomics is concerned with the economy as a whole or large segments of it. In macroeconomics, attention is focused on such problems as the level of unemployment, the rate of inflation, the nation’s total output and other matters of economy-wide significance.”

You May Also Read

  1. Macroeconomic; Scope and Significance, Micro Vs. Macroeconomics
  2. Basic Concepts of Macroeconomics
  3. National Income, GDP and Welfare
  4. Calculation of National Income| Methods and Steps |
  5. Barter System-Limitations | Money | Forms | Measurement |
  6. Commercial Banks | CRR Creation | Central Bank Functions|
  7. Aggregate Demand |Short Run | Equilibrium |
  8. Excess Demand | Deficient Demand |
  9. Government Budget | Objectives | Types |
  10. Foreign Exchange | Rate | Demand and Supply |
  11. Balance of Payment | Structure | Deficit | Types |

Microeconomics v/s Macroeconomics

Basis of difference Microeconomics Macroeconomics
Meaning Microeconomics is related to the study of all the economics aspects as an individual. Macroeconomics is related to the study of all the economics aspects as a Whole.
Area of Study It deals with the problem of scarcity and choices at the level of an individual, household, firm or industry. It deals with the problem of scarcity and choices at the level of economy as a whole.
Assumptions There are certain set of assumptions which are assumed to be constant while studying microeconomics. Similarly, there are also some assumptions which are assumed to be constant while studying macroeconomics.
Central Issue Allocation of resources is the central issue in it. Determination of the overall level of output and employment is the central issue in it.
Methods of Study General equilibrium analysis. Partial equilibrium analysis.
Micro-Macro paradox Some logics may not be logical in microeconomics. Some logics may not be logical in macroeconomics.
Examples Price determination of a particular commodity, individual income and savings. National income, general price level, Poverty.



Scope

(Scope refers to the field or area of study in macroeconomics.)

  1. Estimation of National income and Related Aggregates: It deals with the estimation and definition of national income, GDP (Gross Domestic Product) and NDP (Net Domestic Product).
  2. Theory of Money: Creation of money or credit by commercial banks and role of Central Bank of a country i.e. RBI (Reserve Bank of India) in making and regulating the supply of money in the economy.
  3. Theory of Employment: It studies the theories related to unemployment and employment in the context of Keynesian which explains the causes of unemployment in an economy and suggests remedies to overcome from the situation.
  4. Theory of General Price Level: Macroeconomics also deals with the path of general price level leading to inflation or deflation in an economy.
  5. Role of Government: Government makes rules like Fiscal policies and passes budget which affect the economic activity of a country.
  6. Exchange Rate and Balance of Payments (BOP): Under macroeconomics determination of exchange rate and how it is managed is the crucial area of study.
Significance
  1. Description of the Economy: Macroeconomics offers a deep study of national income, study of unemployment and regulation by the government through Government budget
  2. BOP (Balance of Payments) Status: The index of BOP shows the performance of the economy in relation to the rest of the world.
  3. Problem of Poverty and Pollution: Macroeconomics gives a brief description about the problem of poverty and ways to reduce it to a greater extent.
  4. Policy Formulation: Information like aggregate demand, aggregate supply, total consumption and investments helps in the formulation of the policies and development of the economy.
  5. Economic Stability: Appropriate monetary policy (formed by Central Bank of the Country) and fiscal policy (formed by the government) helps in achieving the economic stability.
FAQ

Q1. What is Macroeconomics?

Ans. Macroeconomics is that branch of economics which studies economic relationship, economic problem and economic issues at the level of economy as a whole such as growth of output, inflation in market, how government policies affect the economy and Affect of import and export on the economy.



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