MACRO ECONOMICS

Meaning
Scope
Importance
Limitations
Features
Assumptions
Relation between Micro and Macro Economics
Difference between Micro and Macro Economics
 Meaning of Macro Economics

The word Macro has origin in Greek word Macros

which means large.
So Macro Economics studies economic problems
from the point of view of entire economy.
Boulding says, “Macro economic theory is that
part of economics which studies the over all
averages and aggregates of the system.”
According to Shapiro, “ Macro economics deals
with the functioning of the economy as a whole.”
 Scope of Macro Economics

Macro economics covers followings:

I. Theory of National Income

II. Theory of Employment
III. Theory of Money
IV. Theory of general price level
V. Theory of economic growth
VI. Theory of international trade
 Importance of Macro Economics

Study of Macro Economics is very important due to

following reasons
a) Helpful in knowing the functioning of an economy
b) Study of National Income
c) Formulation of Economic Policy
d) Study of trade cycles
e) Change in general price level
f) Economic growth ………contd
 t

…….contd
Helpful in study of Micro Economics
International Comparisons
Economic planning
Inter relation among different sectors
Helpful in understanding Macro Economic paradox
 Features of Macro Economics

Macro economics is a short run study

Is the study of the economy as a whole
It is a systematized and comprehensive body of
thought
It is a monetary economics analysis
State intervention important
Role of investment is very crucial
Role of expectations in economics
General theory
 Assumptions of Macro Economics
 Short period
 Perfect competition
 Closed economy
 Diminishing marginal productivity
 Labour is the only variable factor of production
 Money also acts as store of value
 No time lag
 Under employment equilibrium
 Interest is monetary phenomenon
 Optimum utilization of resources
 Saving and investment functions
 Micro and Macro economics compared

Relation Difference

Degree of aggregates
Micro depends on
Objectives
Macro economic
analysis Methods of study
Paradoxes
Knowledge of Micro is Assumptions
essential for Macro Analytical differences
economic analysis Difference relating to
change