Meaning of Macro Economics
Refers to a branch of economics that studies the performance and behavior of the whole economy. The word macro was given by Prof. Ragnar Frisch of Oslo University in 1993. Macroeconomics undertakes the study of economic aggregates, such as changes in employment, national income. rate of growth. Gross Domestic Product (GDP), inflation and price levels. Therefore, it helps in formulating policies in different economic conditions and determining the causes of fluctuations in income, output and employment. Apart from this, macroeconomics plays a major role in estimating national income. Thus, it helps in understanding and analyzing he overall performance of an economy.
Difference Between Microeconomics and Macroeconomics
| Microeconomics | Macroeconomics |
| (i) Microeconomics deals with economic issues related to small economic units: an individual firm, an individual household or an individual consumer. | (i) Macroeconomics deals with economic issues at the level of the economy as a whole. |
| (ii) Microeconomic is basically concerned with determination of price in the market. Accordingly, it is often called as ‘The Theory of Price’. | (ii) Macroeconomics is basically concerned with determination of aggregate output and general price level in the economy as a whole. Accordingly, it is often called “”The Theory of Income and Employment. |
| (iii) Study of microeconomics assumes that macro variables remain constant. Thus, it is assumed that the general price level is constant while we are studying determination of price in the individual market. | (iii) Study of macroeconomics assumes that micro variables remain constant. Thus, it is assumed that the distribution of GDP. remains constant when we are studying the level of GDP in the economy. |
| (iv) Principal components of microeconomics are: (a) Theory of Cosumer Behaviour, (b) Theory of Producer Behaviour, and (c) Theory of Price | (iv) Principal components of macroeconomics are: (a) Theory related to Equilibrium in the Economy (AS = AD), (b) Theory related to Disequilibrium or Theory related to Inflationary and Deflationary Gap in the Economy, and (c) Theory related to Correction of Disequilibrium: Monetary Policy, Fiscal Policy and Exchange Rate Policy. |
