Issues and Importance of Macroeconomics

Macroeconomics:

It is defined as the branch of economics which deals with economy as a whole. It is derived from the word "makro" which means large. It is concerned with aggregate

variable like national income, aggregate expenditure, aggregate supply, total employment, etc. It emerged as the separate branch of economics after the publication of the book General Theory of Employment, Interest and Money in 1936 AD

Basic Issues in Macroeconomics

1. Unemployment

People are unemployed where they are able and willing to work but they cannot find a job. People who are either unfit for work due to physical or mental reasons or do not want to work like Sanyasi are excluded from the category of unemployment. People who are partially employed or are engaged in jobs which are below their qualifications are unemployed. Unemployment brings the problems like:

a)     Loss of GDP that could have been produced if all economics resources have been utilized.

b)     Millions of labor power will be lost forever.

c)     Retards economic growth.

d)     Decrease in the production of goods or services.

2. Inflation

It is the continuous increase in the price level. In inflation, money is unable to perform its job. Causes of Inflation:

a. When aggregate demand exceeds aggregate supply.

b. When cost of production increases

Hyperinflation which is the extreme form of inflation is very dangerous to the economy.

3. Business Cycle

It refers to the fluctuations in the output and employment with alternating period of boom and recession. It shows a rise and fall in aggregate economic activities in an economy. There are 4 phases of business cycle which are as follows:

a. Depression

It is the bad condition of the economy. All aggregate economic activities fall to the lower level.

b. Recovery

All aggregate economic activities began to rise.

c. Prosperity

All aggregate economic activities increase to the high level.

d. Recession

All aggregate economic activities began to fall.

Features of Business Cycle:

a)     It occurs periodically.

b)     It do not cause any single change in any sector or industry.

c)     It also occurs in employment, interest rate, investment, consumption

d)     It is international in character.

e)     It causes a lot of uncertainties  in economy.

4. Economic Growth

it means sustained annual increase in real national income or annual increase in real per capita income of a country over a long period of time. Given the availability of natural resources, economic growth of a country depends on the growth of physical and human capital and progress in technology. The main aim of economic growth is to raise the standard living of the people. The rate of economic growth can be measured in terms of either GDP/GNP, NDP/NNP or per capita income.

Importance of Macroeconomics:

1.     It helps policy makers to formulate development policies.

2.     It simplifies sectors of the economy as they are interrelated.

3.     It helps in redistribution.

4.     It helps to accelerate economic growth.

5.     It helps to curb the problem of unemployment.

6.     It helps to check inflation and monetary problem.

7.     It helps to maintain balance of trade and payment.