About scope and nature of macroeconomics

1. CHAPTER-1
​NATURE AND SCOPE OF
MACROECONOMICS
VERY SHORT ANSWER QUESTIONS
1)What is macroeconomics? List out the four major
uses of macroeconomics.
-Macroeconomics is defined as the branch of
economics that defined the economy as a whole.
In other words, macroeconomics is basically
concerned with national aggregate or total values
such as national income, aggregate
consumption,aggregate saving,total investment etc..
​The four uses/importance are as follows:-
1)To understand the working of the economy.
2)To formulate economic policies.
3)To make international comparisons.

2. 4)To make business decisions...
2) Define mixed economy.
- A mixed economy consists of both private
companies and government/state-owned entities.
Both have control of owning,making,selling and
exchanging goods in the country.A mixed economy
moniters the power of monopolies.
3) list out the basic macroeconomic policies.
- The basic macroeconomic policies are :-
1)Employment and Unemployment
2)Inflation or rising general price level
3)Business cycle or trade cycle
4)Economic growth
4)What are the scope of macroeconomics?
-The scope of macroeconomics are:-
a.Theory of income and employment.
b.Theory of money and price level.
c.Theory of economic growth.
d.Macroeconomic policies.
5)Why macroeconomics is also called lumping method?
- Macroeconomics is the study of aggregate economic variables
such as national income,aggregate consumption,aggregate
saving,total investment etc.
Since, macroeconomics splits up the whole economy into big
lumps to evaluate and analyze the performance and behaviour of
the economy; it is also called the “Method of lumping”.

3. DESCRIPTIVE ANSWER
QUESTIONS
1)Define macroeconomics and explain the major issues
of macroeconomics.
-​Macroeconomics is defined as the branch of economics that defined the
economy as a whole.
In other words, macroeconomics is basically concerned with
national aggregate or total values such as national income, aggregate
consumption,aggregate saving,total investment etc..
​ ​THE FOLLOWING ARE THE MAIN MACROECONOMIC
ISSUES :-
1)Employment And Unemployment :-
Unemployment refers to the involuntary idleness of resources
including manpower. If this problem exists, society’s actual
output(or GNP ) will be less than its potential output.
So, one of the objectives of government policy is to ensure full
employment which implies the absence of involuntary
unemployment of any type.
2)Inflation:-
It refers o a situation of constantly rising prices of commodities and
factors of production . The opposite situation is known as deflation.
During inflation, some people gain and most people lose. So, there
is a change in the pattern of income distribution.
Therefore,one of the objectives of government policies is to ensure
the price level stability which implies the absence of inflation and
deflation.
3)The Trade cycle:-
It refers to the periodic fluctuations in the level of economic or
business activities i.e the tendency for output (GNP) and
employment and fluctuate over time in a recurring sequence of ups

4. and down.The periods of good trade alternate with the period of
bad trade or, boom periods of high output and high employment
alternate with the slump period of low output and low employment.
IN boom periods, unemployment is low but the rate of inflation is
high. IN period of depression, unemployment is high and the rate
of inflation is moderate.
​4)Stagflation :-
​Most modern mixed economics suffer from the disease of
stagflation which implies the co-existence of inflation and unemployment
in a stagnant economy. The tradeoff between inflation and
unemployment is perhaps the most complex macroeconomic issue of
the day. Every country in the world is now struggling hard to fight the
disease of stagflation.
5) Economic growth :-
​Inspite of short-term fluctuations of output that are associated with
the trade cycle, the long term trend of total output over the long period is
known as economic growth.It refers to the expansion of society's
production capacity such as bringing new land under cultivation or seing
up new factories.Growth is measured by annual rate of increase of per
capita income and is illustrated by a rightward shift of production
possibility curve.
6)The exchange rate and the balance of payment:-
​The balance of payments is a systematic record of all economic
transactions between the members of the home country and rest of the
world in an accounting year.These transactions are largely,if not entirely,
influenced by the exchanged rate.It is rate at which country's economy is
exchanged for another currency (or gold).
The trend in the value of rupee in terms of two major currencies of
the world i.e U.S Dollar and British pound has been downward in the last
two decades. Economists are always eager to discover the cause and
consequences of such changes.
2)Explain the importance/uses of macroeconomics.

5. - The main uses or importances of macroeconomics
are as follows:-
1)To understand the working of the economy:-
Macroeconomics gives bird’s eye view of the economy. It helps in
understanding how the macroeconomic variables behave in
aggregate.Study of national income, aggregate output,employment and
general price level is very much essential to understand the working of
the economy.
2)Formulation of economic policies:-
Macroeconomics contributes a lot in the determination of government
economic policies which affect the level of national income, general price
level and employment . Further,targets of saving and investment may
also be determined with the help of macroeconomics.
3)Business decisions :-
​The study of macroeconomics helps to understand the business
environment,trends of international trade,etc. which is very much
important in making decision making.
4)Economic planning :-
Economic planning is concerned with aggregate variables and
therefore, it comes under macroeconomic analysis. A number of
aggregate economic variables are used in determining various
components of economic planning such as objectives, targets,
priorities,policies, annual growth rate and soon.
5)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
information about macroeconomic variables.
3)What are the scopes of macroeconomics?
- The area covered by macroeconomics is called scope of
macroeconomics. The scope of macroeconomics includes the
aggregate or total economic activities of an economy.
​ ​The scope of economics can be explained as follows:-

6. 1)Theory of national income:-
Macroeconomics studies the concept of national income,its
different elements,methods of measurement,and social
accounting. Social accounting refers to the systematic record and
presentation of national income data.
2)Theory of employment :-
Macroeconomics also studies the problem related to employment
and unemployment. It studies different factors determining the
level of employment such as effective demand,aggregate
demand,aggregate supply, aggregate consumption,aggregate
investment, aggregate saving,multiplier etc..
3)Theory of money:-
Changes in demand for and supply of money have considerable
effect on the level of employment.
Macroeconomics,therefore,studies the function of money and
theories relating to it.Banks and other financial institutions are also
part of its study.
4)Theory of general price level:-
Determination of and changes in general price level are also
studied under macroeconomics.Problems concerning inflation or general
rise in price and deflation or general fall in prices are also studied under
macroeconomics.
​5)Theory of economic growth :-
​Study of problems relating to economic growth or increase in real
per capita income forms a part of macroeconomics.It studies the
economic growth of both developed and underdeveloped
economics.Monetary and fiscal policies are also study therein.
6)Theory of international trade:-
Macroeconomics also studies trade among different
countries.Theories of international trade,tariff and protection,dumping
and antidumping etc. are subject matter of great significance to
macroeconomics.

7. 4)Differences between macroeconomics and
microeconomics.
- The differences are as follows:-
S.
n
MICROECONOMICS MACROECONOMICS
1. The term “MICRO” is derived from
the greek word “MIKRO” which
means small.
The term “macro” is derived
from greek word
“MAKRO”which means large.
2. It deals with individual income and
individual price and output.
It deals with national
income,general price and
output.
3. It studies individual economic units. It studies economics as a
whole.
4. It’s central problem is price
determination and allocation of
resources.
It’s central problem is
determination of level of
income and employment.
5. It solves the problem of how to
produce,what to produce,from whom
to produce.
It solves the problem of full
employment of resources.
6. It’s main tools are demand and
supply.
It’s main tools are aggregate
supply and demand.