Concept of Macroeconomics
Concept of Macroeconomics:
The prefix ‘macro’ in macroeconomics is derived from the Greek word ‘makros’ which means large. So, macroeconomics is the study of an economy as a whole or in aggregate form.
- the behaviour of aggregate economic variables such as national income but not individual income,
- aggregate expenditure but not the expenditure of an individual,
- total savings and investment, general price level but not price of a commodity,
- aggregate production, overall consumption, total employment or unemployment, inflation, monetary policy, fiscal policy, foreign trade policy, the balance of payments, etc.
According to K.E. Boulding, “Macroeconomics deals not with individual quantities but with an aggregate of these quantities, not with individual incomes but with national income, not with individual prices but with price level, not with individual output but with national output.”
R.G.D.Allen (Roy George Douglas Allen) defines macroeconomics as, “The term ‘macro-economics’ applies to the study of relations between broad economic aggregates.
Macroeconomic theory deals with the determination of national income and employment. So, it is also called income theory.
In classical and neo-classical periods, there were very limited studies related to macroeconomics. But, after the publication of J. M. Keynes’ General Theory in 1936, the importance of macroeconomics has increased.
To conclude, macroeconomics is comprised of theories that study and explain the aggregates of the economy, national-level economic problems and policies aimed at solving those problems. The analysis of income and employment, general price level, economic growth, and income distribution are the major constituents of macroeconomic theory. The trade cycle, inflation, unemployment, and low rate of economic growth constitutes macroeconomic problems. Monetary policy and fiscal policy are macroeconomic policies of the government implemented to solve such macroeconomic problems.