Wednesday, July 29, 2009

Macro Economics

Macroeconomics attempts to explain how the economy's total output of goods and services and total employment of resources are determined and what explains the fluctuations in the level of output and employment.
"Macroeconomics examines the forest not the trees. It gives us a bird's eye view of the economy"

IMPORTANCE AND USES OF MACROECONOMICS

1.To Understand the working of the Economy
Nowadays, the economic system has become more complex. National economy is affected by the various economic variables such as total income, output, employment and general price level which are independent. All of these variables are statistically measurable. Therefore, the study of macroeconomics helps to get correct and clear picture of the functioning of the economy.

2.Formulation of Economic Policies
The study of macroeconomics becomes indispensable for formulation and successful execution of economic policies of government. Macroeconomics contributes a lot in the determination of government economic policies which affect the level of national income, general price level and employment.

3.Business Decision
The concept of macroeconomics can be used in making business decisions. Macroeconomics helps to answer the questions; what is the general trend in economy? What will be the consumption pattern of the society? Will it be profitable to expand the business? It also helps to determine the trend in international trade.

4.Economic Planning
The developed and the developing countries are making use of economic planning for their economic development. Economic planning is concerned with aggregate variables.

5.To Understand the working of the Economy
Nowadays, the economic system has become more complex. National economy is affected by the various economic variables such as total income, output, employment and general price level which are independent. All of these variables are statistically measurable. Therefore, the study of macroeconomics helps to get correct and clear picture of the functioning of the economy.

6.Formulation of Economic Policies
The study of macroeconomics becomes indispensable for formulation and successful execution of economic policies of government. Macroeconomics contributes a lot in the determination of government economic policies which affect the level of national income, general price level and employment.

7.Business Decision
The concept of macroeconomics can be used in making business decisions. Macroeconomics helps to answer the questions; what is the general trend in economy? What will be the consumption pattern of the society? Will it be profitable to expand the business? It also helps to determine the trend in international trade.

8.Economic Planning
The developed and the developing countries are making use of economic planning for their economic development. Economic planning is concerned with aggregate variables (e.g. annual rate of Economic growth, rates of saving and investment) and therefore it comes under macroeconomics analysis.

9.Development of Microeconomics Theories
Price of commodity will be influenced by the prevailing general price level in the economy. In the situations of inflation, generally the prices will increase, while in the years of depression the prices will go down. Thus no macroeconomic laws and theories can be formulated without per-study of macroeconomics.

10.International Comparisons
Macroeconomics provides necessary information for international comparisons. For example, a comparative study of average national income, consumption and saving between different countries requires macroeconomic informing and investment) and therefore it comes under macroeconomics analysis.

11.Development of Microeconomics Theories
Price of commodity will be influenced by the prevailing general price level in the economy. In the situations of inflation, generally the prices will increase, while in the years of depression the prices will go down. Thus no microeconomics laws and theories can be formulated without per-study of macroeconomics.

12.International Comparisons
Macroeconomics provides necessary information for international comparisons. For example, a comparative study of average national income, consumption and saving between different countries requires macroeconomic information.

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