Introduction to Micro and Macro Economics — Economics STD 12 Commerce / Arts — Question

Introduction : Macro economics is the branch of economics that studies the behaviour and performance of an economy as a whole. It includes inflation, unemployment, working of the monetary system, business cycles, economic policies, etc.

(1) Definition:
(a) J. L. Hansen : “Macro economics is that branch of economics which considers the relationship between large aggregates such as the volume of employment, total amount of savings, investment, national income, etc”.
(b) Prof. Carl Shapiro : “Macro economics deals with the functioning of the economy as a whole. ”

(2) Meaning:
Macro economics is the study of aggregates national income, total employment, total consumption, inflation, total saving, etc.

(3) Features:
(a) Study of Aggregate : Macro economics deals with the study of entire economy. It studies the overall condition in the economy, such as National Income, National Output, Total Employment, General Price levels, etc.

(b) General Price Level : Macro economic studies the determination and changes in general price level which is the average of all prices of goods and services currently being produced in the economy.

(c) policy Oriented : Macro economics is a policy oriented science which is useful in formulating economic policies to promote economic growth, to control inflation and depression, to generate employment, etc.

(d) Lumping Method : Lumping method is the study of the whole economy rather than in part. It considers aggregates like National Income, Total consumption, etc. instead of personal income, PCC, etc.

(e) General Equilibrium Analysis : Macro Economics analysis is based on general equilibrium which deals with the economic system as a whole and studies the inter relationships between the various macro variables in an economy. General equilibrium deals with the behaviour of demand, supply and prices in the whole economy.

(f) Income Theory : Macro economics studies the concept of National Income and its causes of fluctuations that lead to business cycles i.e. inflation and deflation.

(g) Growth Models : Macro economics studies various factors that contribute to economic growth and development. These growth models are used for studying economic development.

(h) Interdependence : There is an element of interdependence among the macro economic variables such as income, output, employment, investment, price level, etc.