Macro Studies

Topics: Macroeconomics, Economics, Supply and demand Pages: 9 (1956 words) Published: March 26, 2013
Meaning and Definition:
According to Professor J.M Culbertson, “macroeconomic theory is a theory of income, employment, prices and money”. According to P.A. Samuelson, “macroeconomics is a study of the behavior of the economy as a whole. It examines the overall level of a nations output, employment, prices and foreign trade”.

Nature, Scope and importance of Macroeconomics
As a method of economic analysis macroeconomics is of much theoretical and practical importance. 1. To understand the working of the economy

The study of macroeconomic variables is indispensable for understanding the working of the economy. Our main economic problems are related to the behavior of total income, output, employment and the general price level in the economy. These variables are statistically measurable, thereby facilitating the possibilities of analyzing the effects on the functioning of the economy. As per the Tinbergen observes, macroeconomic concepts help in “making the elimination process understandable and transparent”. For instance, one may not agree on the best method of measuring different prices, but the general price level is helpful in understanding the nature of the economy.

2. In Economic Policies

Macroeconomics is extremely useful from the point of view of economic policy. Modern governments, especially of the underdeveloped economics, are confronted with innumerable national problems. They are the problems. They are the problems of overpopulations, inflation, balance of payments, general underproduction, etc… The main responsibility of these governments rests in the regulation and control of overpopulation, general price level, general under volume of trade, general output, etc… As per Tinbergen “working with macroeconomic concepts is a bare necessity in order to contribute to the solutions of the great problems of our times”. No government can solve these problems in terms of individual’s behavior. 3. In General Unemployment

The general level of employment in an economy depends upon effective demand which in turns depends upon aggregate demand and aggregate supply functions. Unemployment is thus, caused by deficiency of effective demand. In order to eliminate it, effective demand should be raised by increasing total investment, total output, total income, and total consumption. Thus, macroeconomics has special significance in studying the causes, effects and remedies of general unemployment.

4. In National Income

The study of macroeconomics is very important for evaluating the overall performance of the economy in terms of national income. With advert of the greatest depression became necessary to analysis the causes of general overproduction and general unemployment. This lead to the construction of the data on national income. National income data help in forecasting the level of economic activity and to understand the distribution of income among different groups of people in the economy.

5. In Economic Growth

The economics of growth is also a study in macroeconomics. It is on the basis of macroeconomics that the resources and capabilities of an economy are evaluated. Plans are the overall increase in national income, output, and employment are framed and implemented so as to raise the level of economic development of the economy as whole.

6. In Monetary Problems

It is in terms of macroeconomics that monetary problems can be analyzed and understood properly. Frequent changes in the value of money-inflation or deflation- affect the economy adversely. They can be counteracted by adopting monetary, fiscal and direct control measures for the economy as a whole.

7. In Business Cycles

Further macroeconomics as an approach to economic problems started after the great depression. Thus its importance lies in analyzing the causes of economic fluctuations and in providing remedies.

8. For Understanding the Behavior of Individual units

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