Scribd
Upload
10 views11 pages

DOC-202312

Macroeconomics studies the economy as a whole, focusing on income, employment, inflation, and balance of payments, and aims to analyze the interdependent decisions made by individuals. It plays a crucial role in business by informing economic policy formulation, planning, and understanding the effects of government policies on business activities. Additionally, macroeconomics helps address issues like general unemployment, trade cycles, and builds models to maintain macroeconomic equilibrium.

Uploaded by

piyushpatil1189
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
10 views11 pages

DOC-202312

Macroeconomics studies the economy as a whole, focusing on income, employment, inflation, and balance of payments, and aims to analyze the interdependent decisions made by individuals. It plays a crucial role in business by informing economic policy formulation, planning, and understanding the effects of government policies on business activities. Additionally, macroeconomics helps address issues like general unemployment, trade cycles, and builds models to maintain macroeconomic equilibrium.

Uploaded by

piyushpatil1189
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 11

1.

4 Subject Matter of Macroeconomics:


There is no clear-cut division between micro- and macro-economics. The scope of
macroeconomics can be stated by giving a list of most important problems with which it is
concerned. Macroeconomics is concerned with the behaviour of the economy as a whole.

The subject matter of macroeconomics is income and employment, inflation, balance


of payment problems etc. which occur in milder forms all the time.

The purpose of macroeconomics is to present a logical framework for the analysis of


these phenomena. What does determine income and employment? What does determine the
price level? How are these related?

What policies can be used to affect them and how do they work? These are some of the
questions the analytical framework presented here is meant to handle. Real income, em-
ployment, the price level and the balance of payments are determined by the interaction of
decisions made by the individuals when solving their economic problems; decisions about the
consumption and investment, decisions about the allocation of wealth among alternative assets,
decisions about how much labour to hire and supply, and many others.

Though these decisions are interdependent, it is useful to subdivide the economy into
various sectors of decision-making in order to examine what forces operate in each sector
before looking at the interdependence among them.

1.5. Application of macroeconomics in business decisions:

Macroeconomics helps the business in in-depth knowledge of macro-economic environment


of business relating to industrial policy, licensing policy, economic planning monetary and
fiscal framework and overall economic policy. (Mathur, 2002) The role of macroeconomics in
business policy formulation is being discussed in the following points:

1. Macroeconomic policy
Macroeconomics helps in formulation of economic policy. The subjects of an economic
policy are monetary policy, fiscal policy, incomes policies and policy on balance of payment.
Economic policy should be such that it promotes the business environment and provides
impetus to business activities. (Mathur, 2002)

2. Economic planning
A serious attempt towards self-sustained growth of business is only possible by efficient
planning. Planning is now a days synonymous with growth and development. Identification of
priority areas, estimation of resources and coordination among various sectors of economy can
be done through proper planning. Planning directs the growth in desirable corners.
3. Solving macro paradoxes
Macroeconomics helps in solving macro paradoxes like paradox of thrift related to savings,
paradox of assumption by commercial banks that all depositors would not withdraw their
money on any particular day and their right to withdrawal.

4. Tracing effect of government policy on business


Macroeconomics helps in tracing the implications of government policy changes on existing
business activity.

5. Help in solving problem of general unemployment


Effective demand is the focal point of macroeconomics. Reduction in effective demand brings
economic depression and thereby general unemployment. Hence, the level of effective demand
should be increased in order to increase the level of employment. (Mathur, 2002)

6. Analysis of trade cycles


Macroeconomics tries to know about the behaviour and occurrence of booms and slumps and
their implication on business activity. This analysis is very useful for a free enterprise economy.
Business cycles are bound to occur. Macroeconomics helps the business in facing booms and
slumps so that negative impact is minimized.

7. Macro analysis helps in development of micro analysis


In the deductive method process of logic goes from general to particular. We go on deducting
to draw specific conclusions. Many of micro economic conclusions are outcome of macro
conclusion. The assumption that consumer is rational has been decided only after knowing
about the behaviour of a group. A medico is allowed to specialize in some part of human body
from surgical view point only when he has understood the anatomy and physiology of human
body.

8. Inability of micro economics to study some areas


Micro economics is not able to study monetary problems, fiscal problems, financial sector
problems, foreign exchange regulation problems and inflationary and recessionary situations
problems. Business needs to be protected from these ticklish problems and therefore, needs the
help of macroeconomics.

9. Macroeconomic models
Macroeconomics helps in building or constructing macro-economic models. The major
objective function of a macro economic model is to maintain the macro equilibrium in the
country at the full employment level. The role of government through its monetary and fiscal
operations becomes important as independent variables i.e. these policies are used to explain
the dependent variable i.e. maintaining macro equilibrium.

You might also like