Importance Of Macroeconomics
Macroeconomics : The term ‘Macro’ is derived from the Greek word ‘Makros’ which means ‘Large’. Professor Ackley described that Macro Economics deals with economic affairs in large. It is concerned with the overall dimensions of economic life. Marco Economics the study of aggregates of averages covering the entire economy. These aggregates include several items like total employment, national income, national output, total investment, total consumption, general price level, etc. Importance Of Macroeconomics is huge because it helps us understanding economic policies.
We have to understand the importance of Macroeconomics because it helps us to understand the dynamic aspect and performance of the Economy.
Scope Limitations And Importance Of Macroeconomics
Scope Of Microeconomics : Macro Economics has wider scope and larger purpose. This is explained from the following points
1. Problems or unemployment : Macroeconomics deals with various problems relating to the unemployment, economic fluctuations, inflation, deflation, international trade, economic growth etc.
2. Total investment and output : It deals with various problems in the fields of total investment and total output of the country.
3. Economic Development: Economic development of a country is greatly affected by several obstacles. Macroeconomics studies the nature, causes and consequences of such obstacles.
4. Balance of payments: Macroeconomics is also concerned with the problems relating to the balance of payments and foreign aid of a country.
Importance of Macroeconomics :
Macroeconomics is considered as an important method of economic analysis. It has both theoretical and practical importance. Importance Of Macroeconomics is explained from the following points
1. Understanding economic policies : Macroeconomics is highly useful for understanding the various economic. policies of a country. Especially it is useful for studying the severe problems of developing economies like unemployment, over population, scarcity of goods, low output, hyperinflation etc.
2. Information on the working of the economy : It provides rich information regarding the working of the economy. It helps us to estimate the economic variables relating to the total income, total output, total employment etc. It analyses the working of the economy.
3. Performance of the economy : Macroeconomics helps us to review the overall performance of the economy in different spheres .
4. Economic growth : It acts as the basis of studying the economic growth of the economy.
5. Behavior of individual units : Macro Economics is useful for studying the behavior of individual, units. It explains the causes of deficiency in aggregate demand. The knowledge of the average cost conditions of the whole economy is needed for knowing the reasons for increase in the costs of an individual firm.
6. Dynamic aspect of the economy : Macroeconomics helps us to study the dynamic aspect of the economy. It explains the changes in national income, employment, aggregate supply, aggregate demand etc. All these variables are dynamic since they change from time to time.
Limitations of Macroeconomics :
Macro Economics has the following limitations
1. Ignores individual : Macro Economics is concerned more with the variables affecting the whole economy. It does not concern with the actions of individual consumers, individual producers etc. Its study is not useful as it ignores the welfare of individual consumers.
2. Statistical and conceptual difficulties : It studies various economic phenomena with the help of statistical and conceptual methods. The investigators face difficulties in following these methods. These difficulties relate to the aggregation of micro economic variables.
3. Misleading : Indiscriminate use of Macro Economics may mislead the economists in analyzing various economic problems. For example it is of no use in applying the same principles in the case of full employment and structural unemployment.
4. Fallacy : It involves the fallacy of composition. It assumes that aggregate economic behavior is the sum total of individual activities. But what is real in the case of individual may not be necessarily real in the case of the economy as a whole.