Macro Economics

 Macro Economics:

                               Macro means large. Macro-economic concept was introduced by Dr. Keynes. In this part we discuss problems at national and international level. An overall view of the economy is kept before e g. National Income and employment Aggregate demand, Aggregate supply. Consumption, saving and Investment at national level, Multiplier, Accelerator, Money, Finance and International trade etc.

 According to Prof. R.G.D. Alen:

 “The relationship among major economic aggregates is discussed under macro economic analysis.” E. Shapiro says that: "Macroeconomic theory is the theory of Income, employment, prices and money.

According to Fisher and Dornbusch: 

"Macroeconomics is concerned with the behavior of the economy as a whole." Prof. Boulding defined it as: "Macroeconomics is that part of economic science under which overall averages and aggregates of an economic system are studied." Perof. G. Ackley writes: "Macro-economics is concerned with the aggregate economic activities." Following concepts are discussed under macroeconomics:  

1) National Income and Employment theory: 

Concept of National Income, its determinants and equilibrium of National income is discussed here

 2) Business cycle:

 Different phases of Business cycle, its properties, hypothesis and its remedial measures are discussed under it

3) Money and Banking:

 Concept of money and its function are described here, and also taken into view the effects of changes in the value of money. Functions of central and commercial banks, tools of monetary policy and its objectives, are taken into account. 

4) Public finance: 

Sources of government revenue, items of expenditure tools and objectives of fiscal Policy, Principles of taxation and need of debt, is explained in this part 

5) International Trade:

In this part we discuss the theories of International trade, balance of payments, International financial institutions, volume and value of imports / exports etc.

 Merits: 

Now we take into account the merits of macroeconomics:

 1) Economic planning is needed for comprehensive allocation of national resources, and it has to be discussed under macro-economic analysis.

 2) There is a need of such policies at national level for economic stability, which creates harmony and correlate individual decisions 

3) Mostly economic problems arise at national and international level, e.g. global inflation, Recession, unemployment, over population, oil crises and disorder in balance of payments, which may be solved through national and international policies. 

4) Government responsibilities have increased now-a-days with the establishment of industries and welfare works. So the importance of macro school of thought has increased 

5) Certain decisions are not possible to be taken at individual level these decisions should be taken at macro level, e.g. increase in wages, savings and investment, govt. subsidies relate in taxes. Moreover, imposition of new taxes or an increase in the rate of taxes going on etc., is the subject matter of macro economics.

 Limitations:

 1) Macroeconomics cannot depict the effect and response of various sectors and entities at the collective decisions taken at national level.

2) Macroeconomics cannot judge if, any disturbance occurs in any sector of the economy moreover, remedial measures cannot be made to remove it, e.g. through aggregate savings and aggregate investment, we cannot judge in which sector there are less savings and income

 3) Aggregate view of the economy cannot present the clear picture of all firms and institutions because some firms flourish in even recession and some industries face deficit in boom period also. So the remedial measures taken to reduce the intensity of business cycle can be harmful for such few firms and institutions.