Main features of macro economics

1) Unit of study / nature of analysis – Aggregate and Macroscopic.
Macro-Economics deals with the study of Economy as a whole. It is concerned with the aggregate concepts such as National Income, National Output, National Employment, General level of Prices, Business cycle etc.

2) Theory of National income and employment:
Macroeconomics studies the concept of national income, its different elements, methods of measurement and social accounting.

Macroeconomics deals with aggregate demand and aggregate supply that determines the equilibrium level of income, output and employment in the economy.

It explains the causes of fluctuations in the national income, that leads to business cycles i.e. inflation and deflation

3) Theory of money and interest 
Changes in demand for, and supply of money have considerable effect on the level of employment. Macroeconomics therefore, studies functions of money and theories relating to it. Banks and financial institutions rates of interest are also studied under macroeconomics. 

Monetary and fiscal policies of government are also studied under therein

4) Lumping Method
We can differentiate between Slicing method & Lumping method. In slicing method we are concerned with small individual Slices of the entire object where as Lumping method concerned with the object as a whole. What is “true of parts is not necessarily true of the whole” To recall the example given by Prof. Boulding “forest is an aggregation of trees but it does not reveal the same properties &. behavior patterns of the individual trees to generalize the behavior of the forest” there is therefore a need to have a Lumping approach to deal with the problems of the whole Economy. Macro Economic analysis does this job.

5) A Bird’s eye view of the Economy:
Macro Economy gives an overall view of the economy. It summaries & connects various aggregates so as to show the interrelationship between them.

6) Theory of general price level:
Determination of and changes in general price level and what is the importance of various factors which influence general price level

are also studied under macroeconomics. Problems concerning inflation or general rise in prices and deflation or general fall in prices are also studied under macroeconomics. 

7) A more realistic approach:
Although Macro Economics is difficult to study and is complicated., yet it tends to be more realistic because the entire economy is taken into consideration and thus helps in Policy decision taking.

8) Based on interdependence  – A General Equilibrium analysis :
Macro-Economic analysis deals with the behavior of large aggregates and their functional relationship. It is a General Equilibrium approach in which everything depends on everything else and therefore there is an element of interdependency  among the Macro-Economic variables for e.g. changes in the level of investment will finally result in changes the levels of Income, levels of output, employment and eventually the level of Economic growth.

9) Special Growth Models
Study of problems relating to economic growth and development [increase in per capita real income] forms part of macroeconomics. It studies various factors that contribute to economic growth and development.

Macroeconomics has been useful in developing special growth models. These growth models are applied for economic development because the economics of growth is, in essence, the study of macroeconomics.

10) Neglect of Heterogeneity
The Macro Economy approach overlooks the facts that there exist differences in individual units. The conclusions based on aggregates are not uniformly applicable to different individual units for e.g. when we say that the National Income is increasing it does not necessarily implied that Income of every individual to increasing.

Posted in General Economics