Introduction to Macro

Economics
 Meaning

The Term Macro Economics is derived from the Greek word “Makros” which
means “large”

Macro Economics deals with an analysis of large aggregates and their

averages in the economy as a whole prather than with particular items in it.

It analyses the working of the whole economy,with reference to the behaviour

of large aggregates in the economy.Hence it is called aggregative economies.
  According to Prof. K.E. Boulding,
“Macroeconomics deals not with individual
quantities as such, but with aggregates of these
Definition: quantities, not with individual income but with
national income, not with individual price but
with price level, not with individual output but
with national output”.
 Scope of Macro Economics

1. National Income and Employment: Macro economics analyses the factors which
influence National Income and the various concepts of National Income like
GDP,GNP,NNP,etc.The effects of consumption,investment,government expenditure on
National income and employment are analysed in macro economics.
2. Trade Cycles: Trade cycles refer to ups and downs in business. The various phases
of trade cycles,causes,measures to correct trade cycles are studied in Macro
Economics.
3. General Price level: Determination of general price level, concept of
inflation,causes,effects,measures and control of inflation are important components of
Macro Economics.
4. Supply of money and Demand for money: The various components of money
supply, determinants of money supply, theories like quantity theory of money are
discussed in macro economics. The reasons for demand for money and the various
approaches to demand form a part of macro economics.
5.Economic Growth and Development: J.M.Keynes who developed macro
economics focused on the problem of trade cycles in capitalist countries. His theories
are based on the short run were not applicable to poor and developing countries.
Hence a new branch of macro economics. "Development Economics” emerged in
1950s and 1960s.This branch of macro economics is mainly concerned with the
problem of developing countries and how to overcome them to accelerate growth and
development.
6. International trade: In this component, macro economics is concerned with the
various theories of international Tarde, balance of payments structure, disequilibrium
in balance of payments and measures to ensure equilibrium. The foreign exchange
market, determination of exchange rate, role of central bank in the forex market are
also under the scope of macro economics.
 Importance or Significance of Macro
Economics:

1) Economic System: The dynamic economic system can be analysed with Macro
economics.
2) Economic Policies: Government can formulate economic policies effectively with
the help of Macro economics. Policies related to General Price
level,inflation,National Income, can be framed meaningfully with the help of
Macro Economics.
3) Business Cycles: Business Cycles or trade cycles can be analysed through Macro
Economics and solutions for the problems related to trade cycle can be worked out.
4) Aggregates: The various aggregates like total income,employment,saving,
investment,etc can be analysed with the help of Macro Economics.
5) Study of Micro Economics: Micro economics concepts and principles can be
studied with the aid of Macro economics': the behavior of a particular business firm
can be formed on the basis of group behavior.
6) Interdependence of Aggregates: The various aggregates like National Income,
Money supply,employment,etc are interdependent and their relationship is complex.
To analyse to foresee the future behavior Macro Economics is essential.