It lays down a criterion to list the areas that may, or may not, fall within its purview. 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. It is called price theory. The curved steps t 0 to E n show the macro-dynamic equilibrium path. The rise in wage rate is made possible by increase in profits as a consequence of increased demand for capital goods.
If the economy is working at situation A where it is producing at a constant rate without any change in the variables, it is a static state which is functioning at a point of time. Economic problems are mainly related to the employment, behavior of total income and general price in the economy. B Com Nature and Scope of Macroeconomics Part - 1 - Macro Economics Summary and Exercise are very important for perfect preparation. This rough division between micro and macroeconomics is not rigid, for the parts affect the whole and the whole affects the parts. In physics, it means a state of rest where there is no movement. It is concerned with the problems of unemployment, economic fluctuations, inflation or deflation, international trade and economic growth.
Last but not the least, is that macroeconomic theory has saved us from the dangers of application of microeconomic theory to the problems of the economy as a whole. Problems It deals with micro problems such as determination of: price of a commodity, a factor of production, satisfaction of a consumer etc. On the other hand, macroeconomics is based on general equilibrium analysis which is an extensive study of a number of economic variables, their interrelations and interdependences for understanding the working of the economic system as a whole. It is, indeed, difficult to cover the scope of macroeconomics in any single definition. Banks and financial institutions are also studied under macroeconomics. These aggregates include several items like total employment, national income, national output, total investment, total consumption, general price level, etc. .
In international trade, the problems of balance of payments and foreign aid fall within the purview of macroeconomic analysis. But aggregation in microeconomics is different from that in macroeconomics. A flow variable has the time dimension t, as per unit of time or per period. The scope of macroeconomics includes the following parts: Clearly, the study of the problem of unemployment in India or general price level or problem of balance of payment is macroeconomic study because these relate to the economy as a whole. Conclusion: We may conclude that macroeconomics enriches our knowledge of the functioning of an economy by studying the behaviour of national income, output, investment, saving and consumption.
Thus, both economic dynamics and economic statics are essential for the study and solution of economic problems. Our main economic problems are related to the behaviour of total income, output, employment and the general price level in the economy. Growth with stability : Microeconomics helps to achieve the target of growth with stability. The government debt is a stock but the government deficit is a flow. Microeconomics explores the patterns of supply and demand that determine how prices and outputs are established in individual markets. The theory of trade cycle is also covered by macro-economics.
It is both positive and normative science since the actual happening and the future happenings are dealt. For example, store of cloth in a shop at a point of time is stock. Theories of international trade, tariff, protection, etc. It neither develops nor decays. It explains the factors which determine the level of national income and employment in an economy.
Nature and Scope of Macroeconomics Part - 1 - Macro Economics notes for B Com is made by best teachers who have written some of the best books of B Com. Some economists consider economics as a science and art while few others as science and applied science. Kaleckly and Nicholas Kaldor developed the modern theory of distribution called macro-economics theory distribution. In order to eliminate it, effective demand should be raised by increasing total investment, total output, total income and total consumption. The thing that limits our understanding of macroeconomics is the inability to take a sufficiently distant stance or perspective, in order avoid confusion from the microeconomics aspects. The stock of capital can only increase with the increase in the flow of investment, or by the difference between the flow of production of new capital goods and consumption of capital goods. A rise in national income does not mean that individual incomes have risen.
Analysis of production efficiency, consumption efficiency, and overall economic efficiency are conducted on the basis of microeconomics. On the other hand, macroeconomics is based on time-lags, rates of change, and past and expected values of the variables. Let us analyse the use of macroeconomic study in the solution of certain complex economic problems. Unless the causes of deficiency in aggregate demand are analysed it is not feasible to understand fully the grounds for a fall in the demand of individual products. Analysis of monetary problems Knowledge of determination of monetary policy of a country, the study of its effect and cause of monetary problems and solutions for the removal of these problems is done only by Macroanalysis. Monetary and fiscal policies of government are also studied under therein.