Question

Do you agree with the following statements? Give reasons.

1) The scope of Macro-Economics is wide.
2) Macro-Economics deals with the study of individual behavior.
3) Macro-Economics is individualistic
4) Macro-Economics is different from Micro-Economics.
5) Macro-Economics is a partial equilibrium analysis.

Answer 1

1) The above statement is correct. Macroeconomics is all about the complete utilization of resources, full employment level, price stability, and growth of the economy. No economy is capable enough in utilizing all of its resources effectively and efficiently. In some economies, resources are underutilized, while in some economies resources are over utilized. To achieve an ever increasing growth rate and efficient utilization of resources, it is necessary to use macroeconomic models and policies. Since all the economies follow and frame macroeconomic policies for their economic growth, it can be said that it has a wide scope.

2) The above statement is not correct as macroeconomics is that branch of economics which deals with the study of aggregates covering the entire economy. It is concerned with total employment, national income, national output, aggregate demand, aggregate supply, aggregate consumption and savings, total investment etc. On the other hand, microeconomics deals with the study of individual behaviour.

3) The above statement is not correct. Macroeconomics is not individualistic as it does not study only one individual consumer or one individual producer. In fact, macroeconomics studies the behaviour, problems and the economic situation of all the consumers at a time. In other words, it can be said that macroeconomics involves aggregation of all the consuming units.

4) The above statement is correct. Macroeconomics is quite different from microeconomics. Macroeconomics is concerned with large sections of the economy or the economy as a whole. It is that branch of economics which deals with the economics activities by all the economic spheres, varying economic situations and economic problems of the economy as a whole. Microeconomics, on the other hand, studies only one individual consumer or one individual producer like the households, firms, consumers etc.

5) The above statement is not correct. Macroeconomics is a general equilibrium analysis. It studies all the economic variables simultaneously and also takes into account the functional relationship of these variables. This approach assumes “everything depends on everything else”. On the other hand, partial equilibrium is the method of study in microeconomics.