As mentioned above, Microeconomics is a branch of economics that deals with individual units of the economy. It involves its field of study on individual units like the consumer, or the household. The subject deals with problems associated with determining the price of a commodity. These direct or indirect factors affect the demand and supply of a commodity and the procurement of the satiety level of an individual. The main aim of microeconomics is maximizing profit and minimizing the costs incurred. This utilized in such a way that it is available to future generations and that there is an equilibrium.
The term macroeconomics came into existence in 1933 by Ragnar Frisch. However, its approach towards economic problems came in the 16th and 17th centuries. As a result, this originated with mercantilists.
It is that branch of science which deals with the economy as a whole or in totality including the Macro factors. The hope of macroeconomics does not involve studying the individual units of an economy. But, the economy as a whole, studies the total and average of the entire economy. Such as the national income, total employment, total saving and Investments, total demand and supply, and the general price level.
The subject of macroeconomics revolves around the determination of income and employment. Therefore, it is known as the “theory of income and employment.”
Control over the inflation and deflation cycle was only made possible by choosing the current economic policies. These policies were formulated at the macro level. The study of individual units has also become impossible. Moreover, governments’ participation through monetary and fiscal measures in the economy has increased. Therefore, the use of macro analysis is irrefutable.
So now, we understand that macroeconomics is a specialized field of Economics. It focuses on the economy through the aggregate of the individual units to determine there is a large impact on the complete nation. All the prominent policies and measures are based on this concept. For example, the per capita income determines the National income. This is nothing but an average of the total earnings of all the citizens in the nation.
It is understood that the Government is the regulating body of a nation. It considers the various aspects which are critical and have a direct impact on the lives of the citizens. There are six theories under the scope of macroeconomics:
The growth of an economy also comes under the study of macroeconomics. The resources and capabilities of an economy are evaluated based on the scope of macroeconomics. It schemes the increase in the level of national income, output, and the environment level. They have a direct impact on the economic development of an economy.
Macroeconomics assesses the impact of the reserve bank in the economy, the inflow and outflow of capital, and its effects on job rates. The frequent change in the value of money caused due to inflation and deflation diversely affect the economy of a nation adversely. They can be aggravated by taking monetary, fiscal policies and direct control measures for the economy as a whole.
It is an area of study that focuses on the export and import of products or services. In brief, it points out the effect on the economy through cross-border commerce and customs duty.
This scope of macroeconomics assists in determining the level of unemployment. It also determines the conditions that lead to such conditions of unemployment. Hence, this affects the production supply, consumer demand, consumption, and expenditure behavior.
The most significant of these is the study of commodity prices and how specific price rates fluctuate due to inflation or deflation.
It refers to how the expenditure meets over the deficit income which explains itself as a form of budgetary decision under macroeconomics.
The Reserve Bank is establishing monetary policy in coordination with the Government. These policies are measures taken to maintain economic stability and growth in the country by regulating the different interest rates.
Macroeconomics is a vital concept that considers the whole nation and works for the welfare of the economy.
It is helpful for the timing of economic fluctuations to prevent or be equipped for any financial crisis or any long – term negative situations.
The system of fiscal and monetary policies depends entirely on the analysis of the widely held macroeconomic conditions in the nation.
Macroeconomics mainly aims to helps the Government and the financial bodies to prepare economic stability in the country.
This stream of economics gives a broader perspective of social or national issues. The ones who want to contribute to the welfare of society need to study macroeconomics.
It ensures or keeps a check over the proper functioning of the country’s economy and actual position.
The analysis of macroeconomics theories and issues helps the economists and the Government to figure out the causes and possible solutions of such macro-level problems.
Dealing with various economic conditions through the use of macro-economic data opens the door for growth in the country.
An economist needs to analyze the following problems while studying macroeconomics:
Business activities also result in societal costs like deforestation and land degradation. To regulate this social expense, the Government carries out clear laws and legislation. These regulations serve as a barrier for business organizations.
The economic conditions in a nation have an immense impact on the activities of every organization either directly or indirectly. Different economic patterns or variables impacting industry include the Gross Domestic Product ( GDP), job rates and conditions, revenue incentives, banking, and pricing policies.
Many organizations trade (either export or import of goods) in international markets. They are sensitive to the fluctuations in the economy of other countries, exchange rates, prices, and other varied factors. Hence, such changes may influence the economic conditions of the country. This might also end up affecting business organizations.
Macroeconomics is the foundation of many economic policies. It lays the basis of a regional decision-making mechanism in a nation. But, the policies underpinned by this concept usually have a double impact on society as a whole and individual citizens. It requires an observational, logical, incredible approach.