Question

Give reasons or explain the following statements

1) Macro-Economics is the study of aggregates.
2) Macro-Economics is also known as income and employment theory.
3) The scope of Macro-Economics is wide.
4) Macro-Economics deals with whole economy.
5) Macro-Economics is different from Micro-Economics.

Answer 1

1) Macroeconomics is the study of aggregates; as it studies the economy as a whole, rather than the individual economic units as a consumer or a producer. It studies the aggregates such that they cover the entire economy. For instance, it studies national income rather than individual income. Similarly, it studies aggregate price levels rather than price level of a particular commodity.

2) Macroeconomics is also known as the ‘Theory of Income and Employment’, or income analysis, as it focuses on how income and employment levels are determined in an economy and what causes fluctuations in them. In addition macroeconomics also explains the factors that lead to increase in the output, income and employment in the long run.

3) Macroeconomics is said to have a wide scope as it deals with aggregates for the economy as a whole. Some of the aggregates that are studied in macroeconomics are national income, general price level, employment, investment, etc. Macroeconomics aims at studying the interrelationship between such aggregates and accordingly determine the cause and effect of variations in them. Thus, it can be said that it studies the various economic units in aggregate terms.

4) Macroeconomics is a branch of economics that studies aggregates covering the entire economy. It studies total employment, national income, national output, aggregate demand, aggregate supply, aggregate consumption and savings and total investment. It studies the entire economy in the context of equilibrium. It studies the behaviour of a number of economic variables at a time and takes into consideration their functional relationship and interdependence. Thus, it can be concluded that macroeconomics deals with the economy as a whole.

5) Macroeconomics is concerned with large sections of the economy or the economy as a whole. It is a branch of economics that studies economics activities of various economic spheres and analyses economic situations and economic problems of the economy as a whole. Microeconomics, on the other hand, studies only one consumer or one producer. In other words, while microeconomics studies individual economic units, on the other hand, macroeconomics studies aggregates. Accordingly, microeconomics is based on partial equilibrium analysis, on the other hand, macroeconomics is based on general equilibrium analysis. In this regard, it can be said that macroeconomics has a wider scope than microeconomics.