Introduction to Macro Economics – Nature, Scope, Importance & More

Introduction to Macro Economics – Nature, Scope, Importance & More

The term ‘Macro’ has been derived from a Greek word ‘Macros’ meaning ‘large’. Thus, Macro Economics is the study and analysis of an economy as a whole.

Macro Economics involves the study of:

  • the behaviour of an economic system as a whole
  • aggregates and averages covering the entire economy
  • behaviour of large aggregators such as:
  • Total Employment
  • National Product
  • National Income
  • Price-Levels etc.

Macro Economics deals with problems such as:

  • Unemployment in the country
  • Inflation/Deflation
  • Economic Growth
  • International Trade
  • National Output
  • National Expenditure
  • Level of Savings & Investment

Scope of Macro Economics:

The scope of Macro Economics lies in the study of analysis of the following:

  • Theory of Employment
  • Income Theory
  • Theory of Price level
  • Theory of Growth
  • Distribution Theory
  • Theory of National Income

Nature/Characteristics of Macro Economics:

  • It is a study of national aggregates
  • It studies economic growth
  • It ignores individual differences between aggregates

Importance of Macro Economics:

  • It helps to understand working of the whole economy
  • It helps in formulation of economic policies
  • It studies and analyses growth and development in an economy
  • It helps in development of micro-economic theories

Difference between Micro Economics and Macro Economics

 Micro EconomicsMacro Economics
MeaningIt studies individual units of an economyIt studies the economy as a whole
Field of StudyIt studies individual economic units such as: a consumer, a firm, a household, an industry, a commodity etc.It studies national aggregates such as: national income, national output, general price level, level of employment etc.
ProblemsIt deals with micro problems such as determination of: price of a commodity, a factor of production, satisfaction of a consumer etc.It deals with problems at a macro level like problems of employment, trade cycles, international trade, economic growth etc.
NatureIt is based on disaggregation of unitsIt is based on aggregation of units
 It considers individual differences between different unitsIt does not consider individual differences between aggregates
ObjectivesMaximize UtilityFull Employment
 Maximize ProfitsPrice Stability
 Minimize CostsEconomic Growth
  Favourable Balance of Payment situation
MethodologyStatic Analysis i.e.

Does not explain the time element

Equilibrium conditions are measured at a particular period.

Dynamic Analysis i.e. It is based on time lags, rates of change, past and expected values of variables

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