SUBJECT-MATTER OF MACRO ECONOMICS

SUBJECT-MATTER OF MACRO ECONOMICS

         The Study of Economics is divided by the modern economist into two parts Micro-Economics and Macro-Economics.

MACRO-ECONOMICS:

                An a economic system may be looked at as a whole or in terms of its innumerable decision-making units (such as consuming units, e.g. individual consumers and households) producing units e.g. ( firms, farms business and mining concerns), individual factors of production (e.g. laborers, land, owners, capitalist, entrepreneurs) and individual Industries, (e.g. cotton textiles, iron and steel, toy-making). When we are analyzing the problems of the economy as a whole, it is macro-economic study. While an analysis of the behavior of any particular decision-making unit, such as a firm, an industry, a consumer constitutes micro-economics.

                    Micro-economics is also called price theory and Macro-economics is called income theory. “price theory explain the composition, or allocation, of total production. Why more of some things is produced than of others. Income theory explains the level of total production and why the level rises and falls”.

                    Lord Keynes increase attention has been given to the analysis of economic system as a whole. This is macro-economics, in macro-economics, we study the trees, macro-economics is concerned with aggregate and average of the entire economy, such as national income, aggregate output, total employment, total consumption, saving and investment, aggregate demand, aggregate supply, general level of price, in another words in Marco-economics we study how that aggregates and average of the economy as a whole are determined and what causes fluctuation in them.  

  

UTILITY OF MACRO-ANALYSIS

              The importance that Marco-analysis has come to acquire is not without reasons. The Macro-approach is useful in several ways:

a) It is helpful in understanding the functioning of a complicated economic system. It gives a bird’s eye view of the economic world. Micro-analysis i.e. study on individual aspects of the economy will lead us nowhere. Undoubtedly, the economy is more important than the individual.

b) For the formulation of useful economic policies for the nation, macro-analysis is of the utmost significance. Economic policies cannot be obviously based on the basis of the fortunes of an individual commodity. It is far more fruitful to regulate aggregate employment and national income and to work out a national wage policy.

C) Macro-analysis also occupies an important place in economic theory in its pursuit of the solution of urgent economic problems. These problems relate to aggregate output, employment and national income. Economic theory seeks to explain fluctuation in the level of national income, output and employment. Thus, we are able to study the economy in its dynamic aspect.

LIMITATIONS OF MACRO-ANALYSIS

  

                 Marco-analysis has limitation of its own:

(a) Individual is ignored altogether it is individual welfare which is the main aim of economics. Increasing national saving at the expense of individual welfare is not a wise policy.

(b) The macro-analysis overlooks individual differences. For instance, the general price level may be stable, but the prices of food-grains may have gone spelling ruin to the poor. A steep rise in manufactured articles may conceal a calamitous fall in agricultural prices, while the average prices were steady. The agriculturists maybe ruined, while speaking of the nature, composition and structure of the components.