Macro Economics

11524 Words Jun 2nd, 2011 47 Pages
Q1. Define micro and macro economics, Distinguish between them, and explain the scope, importance and its limitations
Ans. modern economy analysis has been divided into two major branches that is micro and macro economics. Micro economics means the economics system which deals individual economics unit on the other hand macro economics means the economics unit which deals aggregate as a whole that is national income, general employment, and total out –put, general price level etc.
These two concepts first time used by PROF.R.FRISCH of Oslo university in 1933.
But ,later on these two concepts systematically explained by J.M.Keynes in his famous book “General theory of employment,interst and money”.
Distinguish between micro and macro
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Macro-economic enables us to take certain steps to counter attack the adverse influences of inflation and deflation. g) Study of national income: it is the study of macro-economic which has brought forward the importance of study of national income and social accounts. With help of national income we are in a position to know which country is developed and which is not. Again, with help of the national income correct economic policies been formulated. h) Performance of an economy: macro-economic helps us to understand and analysis helps us to understand and analyses the performance of an economy. It implies result oriented study of an economy in terms of actual and factual achievements. i) Nature of material welfare: macroeconomic enables us to study the nature and size of the material welfare of the nations, the problem of measuring the social welfare is not easy, even welfare economy does not help us at that time , we take the help of macro economics.
Limitations of macro economics:
Macro-economic analysis is very useful in studying the national problems that is – the problems related to the whole economy but there are certain limitations too, these limitations are in the nature of particle difficulties in formulating meaningful aggregates. The main limitations are: a) False generalization b) Difficulties in measuring the aggregates c) Diversities a) False generalization:
The aggregate approach draws the

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