Macro Economics we study how these aggregates and averages of the economy as a whole are determined and what causes fluctuations in them. In Macro economics we study how an economy grows. Macro economics also called the national income, employment and rate of interest.
In Macro economics the concept of national income, it determination and distribution total output, aggregate consumption, aggregate savings, aggregate investment, aggregate demand, aggregate supply and rate of interest are discussed. In this subject we discuss generally the following:
Theory of Income Employment and Rate of Interest
In this part the concept of national income, its determination, relationships between income and consumption, investment, rate of interest and savings studied. Principles of multiplier and acceleration explained
Theory of Trade Cycle
The problems arising due to fluctuations in price level e.g. inflation, deflation, depression discussed.
The difficulty relating to determination of value of money, demand for money and supply of money studied.
Theory of International Trade
The crisis relating to international trade e.g. exchange rate, exchange control, tariffs, quotas, protection, economic order and balance of payment etc discussed.
Merits of Macro Economics
- The most modern, theories of economics planning and economic development are studies under that subject.
- Some decisions cannot made at individual level e.g. increase in wage rate, taxation system and changes in rate of interest.
- Most of the economic problems of the present time e.g. unemployment high growth rate of population, adverse balance of payments, inflation, depression and low rate of economic development and economic growth are studied only in that subject.
- For economic stability the policies can framed at national level.
Demerits of Macro Economics
- In the boom period when most of the firms are earning profits there may be some firms which are facing losses.
- If an individual unit is not working efficiently. It cannot seen in macro economics e.g. while studying aggregate saving and investments. It not possible to find out where the savings and investment rate high and where it is low.