Macroeconomics: Meaning, Features and Importance

Macroeconomics

The word ‘Macro’ was derived from the Latin word ‘Makros’ which means large or whole.

Macroeconomics is that branch of economics which deals with the large units of economics, like national income, saving, consumption etc. 

Macroeconomics is the study of aggregate economic variables as a whole.

It studies about national income, price level, employment level, money, economic growth rate etc.

National income, aggregate consumption, aggregate savings, aggregate investment etc. are related to the whole economy.

According to K.E. Boulding, “Macroeconomics deals not with individual quantities but with aggregates of these quantities, not with individual income but with national income, not with individual prices but with price level.”

Features or characteristics of macroeconomics

·         It is aggregate economics.

·         It is concerned with the behavior of the economy as a whole.

·         It is policy science and more normative.

·         Its analytical tools are fiscal policy and monetary policy.

·         It is also known as income and employment theory.

·         Its principal variables are national income, total consumption, total saving, total expenditure, total investment etc.

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Aspect of Macroeconomics

The theory of income and employment

This theory covers consumption function and investment function.

In macroeconomics we study what are the factor and how does these factors determine the level of income and employment.

The theory of general price level (inflation)

The theory of general price level can be determined with the help of macroeconomics.

The theory of economic growth

The theory of economic growth is another important branch of macroeconomics.

This theory suggests the ways to accelerate growth rate of the economy.

Modern theory of distribution

Macroeconomics studies what are the factors and how these factors determine the relative share of different classes of people in national income.

Importance of Macro Economics

Macroeconomics has both practical and theoretical importance in various fields, which are as follows:

To understand the functioning of the economy

Macroeconomics is useful in understanding the functioning of the complicated economic system.

The main economic problems such as aggregate income, output, employment, price level are statistically measurable.

Macroeconomics also helps to analysis the effects on the functioning of the economy.

To formulate useful economic policies

Macro-economic analysis helps for the formulation of useful economic policies of the nation.

It helps to regulate aggregate employment, national income and to formulate national wage policy.

To solve monetary problems

Macroeconomics is useful to understand and analysis the monetary problems such as frequent changes in the value of money, inflation etc.

Helpful in international comparison

Various macro-economic variables like national income, total output, aggregate demand, and consumption function of different countries can easily be compared.

Thus, macroeconomics is useful in international trade.

Helpful in controlling economic fluctuations

Economic fluctuations like trade cycle, inflation, deflation etc need to be handled appropriately in correct period of time; for this the knowledge of macroeconomics is essential.

Difference between Microeconomics and Macroeconomics

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