Question

Define or Explain the following concepts

1) Macro-Economics
2) Macro variables
3) General equilibrium

Answer 1

1) Macroeconomics is concerned with large sections of the economy or the economy as a whole. It is a branch of economics that deals with various economic activities, economic situations and economic problems of the economy as a whole.

2) Macro variables are the aggregate quantities that change from time to time. The major macroeconomic variables are aggregate price, aggregate demand, aggregate supply, inflation and unemployment.

3) General equilibrium is a method to study equilibrium in different markets simultaneously. It is the method of studying macroeconomics. According to Stigler, the theory of general equilibrium is the theory of inter-relationship of all units of the economy. Hence, this method assumes that all macroeconomic variables are interdependent.