The term ‘Macro’ has been derived from a Greek word ‘Macros’ meaning ‘large’. Thus, Macro Economics is the study and analysis of an economy as a whole.
Macro Economics involves the study of:
- the behaviour of an economic system as a whole
- aggregates and averages covering the entire economy
- behaviour of large aggregators such as:
- Total Employment
- National Product
- National Income
- Price-Levels etc.
Macro Economics deals with problems such as:
- Unemployment in the country
- Inflation/Deflation
- Economic Growth
- International Trade
- National Output
- National Expenditure
- Level of Savings & Investment
Scope of Macro Economics:
The scope of Macro Economics lies in the study of analysis of the following:
- Theory of Employment
- Income Theory
- Theory of Price level
- Theory of Growth
- Distribution Theory
- Theory of National Income
Nature/Characteristics of Macro Economics:
- It is a study of national aggregates
- It studies economic growth
- It ignores individual differences between aggregates
Importance of Macro Economics:
- It helps to understand working of the whole economy
- It helps in formulation of economic policies
- It studies and analyses growth and development in an economy
- It helps in development of micro-economic theories
Difference between Micro Economics and Macro Economics
| Micro Economics | Macro Economics | |
| Meaning | It studies individual units of an economy | It studies the economy as a whole |
| Field of Study | It studies individual economic units such as: a consumer, a firm, a household, an industry, a commodity etc. | It studies national aggregates such as: national income, national output, general price level, level of employment etc. |
| Problems | It deals with micro problems such as determination of: price of a commodity, a factor of production, satisfaction of a consumer etc. | It deals with problems at a macro level like problems of employment, trade cycles, international trade, economic growth etc. |
| Nature | It is based on disaggregation of units | It is based on aggregation of units |
| It considers individual differences between different units | It does not consider individual differences between aggregates | |
| Objectives | Maximize Utility | Full Employment |
| Maximize Profits | Price Stability | |
| Minimize Costs | Economic Growth | |
| Favourable Balance of Payment situation | ||
| Methodology | Static Analysis i.e.
Does not explain the time element Equilibrium conditions are measured at a particular period. |
Dynamic Analysis i.e. It is based on time lags, rates of change, past and expected values of variables |