Humanities & Social Sciences

Macroeconomics is the study of aggregates or averages covering the entire economy such as total employment, national income, national output, total investment, total consumption, total savings, aggregate supply, aggregate demand, and general price level, wage level and cost structure. In other words, it is aggregative economics which examines the interrelations among the various aggregates, their determination and causes of fluctuations in them. Thus, in the words of professor Ackley. Macroeconomics deals with economic affairs in the large, it concerns the overall dimensions of economic life. It looks at the total size and shape and functioning of the elephant of economic experience, rather than working of articulation or dimensions of the individual parts. 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 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 economies are confronted with innumerable national problems. They are the problems of overpopulation, inflation, balance of payments, general underproduction, etc. The main responsibility of these governments rests in the regulation and control of overpopulation, general prices, general volume of trade, general outputs, etc. Tinbergen says, 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 behavior. Let us analyses the use of macroeconomic study in the solution of certain complex.