7.

Introduction to Macro Economics

Definitions:-

 Macro-economics :-
It deals not with individual quantities as such,
but with aggregates of these quantities, not with
individual incomes, but with national incomes, not with
individual prices, but with price level, not with individual
output but with national output.
 Lumping method:-
It is the in depth study of whole economy. It
studies general price level, aggregates of supply,
aggregates of demand, etc.
 General equilibrium:-
To explain the behavior of various variables at
a time and takes into consideration their
interdependency.
Subject matters of macroeconomics:-

 Theory of income and employment

1. Explains the determinants of national income and
employment.
2. Explains fluctuations in income, output and
employment.
3. This includes theory consumption function and Theory
of investment.
4. The above theories are collectively known as Theory of
fluctuation or Business cycle.
5. It explains relationship between income and
employment.
6. It provides policies to solve the problems related to
above variables.
 Theory of general price level and inflation
1. It determines the level of general price.
2. Explains fluctuation in price.
3. It studies causes and effects of inflation and depression.
4. It also suggest economic policies to tackle these
problems.
 Theory of growth and development
1. It studies causes of under development and poverty in
poor countries.
2. It also gives solution to upgrade such countries.
 3. The theory also deals with many important problems,
like full utilization of productive capacity in developed
countries.
 Macro theory of distribution
1. It studies the shares of various classes in the total
national income.
2. It specially studies the shares of workers and capitalists.
3. It also deal with relative shares of rent, wages, interest
and profits in total national income.