Define Macroeconomics and its features

Macroeconomics is defined as that branch of economics which studies economics activities (including economics issues and economics problems) at the level of an economy as a whole.

Example of macroeconomics

There are two examples of macroeconomics are

  1. Aggregate demand
  2. Aggregate Supply

Example of microeconomics

There are two examples of microeconomics are

  1. Aggregate demand
  2. Aggregate Supply

Difference between Macroeconomics and Microeconomics.

The difference between Macroeconomics and Microeconomics are

  1. Basis of the study.   Microeconomic studies Problems of Scarcity and choice at the level of an individual, a household, a firm or an industry whereas macroeconomic studies problems of scarcity and choice at the level of the economy as a whole.
  2. Aggregation: In microeconomics, there is a limited degree of aggregation of economic variables, as compared to macroeconomics.
  3. Central issue:  Allocation of resources is the central issue of microeconomics whereas the level of output is the central issue in macroeconomics.

Interdependence between macroeconomics and microeconomics.

There is two interdependence between macroeconomics and microeconomics are as follows.

  1. Microeconomic depends upon macroeconomics:  Microeconomic variables depends on the level and behavior of macroeconomic variables. Illustration –  wage rate in a particular industry will be influenced by the overall wages rate in the economy as a whole.
  2. Macroeconomic depend upon microeconomics: Macro variables depend upon the level and behavior of microeconomic variables.  Illustration – Aggregate demand in the economy is simply the sum total of demand at the micro-level, or it is the sum total of the demand for all goods and services in the economy.
  3. Microeconomics deals with individual economics units whereas macroeconomic deals with aggregates or averages
  4. Microeconomic primarily concerns the allocation of resources by an individual economic unit. Macroeconomics, on the other hand, is the study of relations between economics aggregates.
  5. The main tools of microeconomic are demand and supply while the main tools of macroeconomics are aggregate demand and aggregate supply.

What is meant by macroeconomics

Macroeconomic is defined as that branch of economics which studies economics activities (including economics issues and economics problems) at the level of an economy as a whole.

Scope of  Macroeconomics

Theory of National Income: Macroeconomic studies the concept of National Income, its different elements and the method of measurement.

Theory of employment: Macroeconomic studies the problems relating to employment and unemployment. It studies different factors determining the level of employment, viz, aggregate supply, etc.

Who are economic agents?

Macroeconomics is defined as that the branch of economics which studies economics activities ( including economics issues and economic problems ) at the level of an economy as a whole.

What is a macroeconomic paradox

The macroeconomic paradox means that what is true at micro levels may not exactly be true at macro levels. Employment in a particular industry can be increased through wage cuts, not in the whole of the economy. Saving is a virtue at the micro level but not necessarily at the macro level.

Name the four sectors of the economy.

The four sectors of the economy are::

  • Household sector: Households are the owners of the factor of production and are essentially the consumers.
  • Producer sector: engaged in production activity or value-adding activity.
  • Government sector: which acts both as a welfare agency as well as producer.
  • The External sector: also called the rest of the world sector engaged in exports and imports of goods and the flow of capital between the domestic and other countries of the world.

Business Cycle of Macroeconomic

Business activity always shows ups and downs, it never shows a steady pattern of change for all time to come. Fluctuation in Aggregate Demand generates fluctuations in business activity, popularity known as Business or trade cycle. Aggregate demand brings the business cycle in the economy.

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