Importance of Macroeconomics | (7 Importance) Free Economic Blogs

Importance of Macroeconomics

Meaning of Macroeconomics:

Macroeconomics is the branch of economics that analyses the entire economy. It deals with the total employment, national income, national output, total investment, total consumption, total savings, general price level interest rates, inflation, trade cycles, business fluctuations, etc. Thus, macroeconomics is the study of aggregates.

Definitions of Macroeconomics

1) J. L. Hansen – “Macroeconomics is that branch of economics which considers the relationship between large aggregates such as the volume of employment, total amount of savings, investment, national income, etc.”

2) Prof Carl Shapiro – “Macroeconomics deals with the functioning of the economy as a whole.”

Importance of Macroeconomics

1) Functioning of an Economy:

The macroeconomic analysis gives us an idea of the functioning of an economic system. It helps us to understand the behaviour pattern of aggregative variables in a large and complex economic system.

2) Economic Fluctuations:

Macroeconomics helps to analyze the causes of fluctuations in income, output, and employment and makes an attempt to control them or reduce their severity.

3) National Income:

The study of macroeconomics has brought forward the immense importance of the study of national income and social accounts. Without a study of national income, it is not possible to formulate correct economic policies.

4) Economic Development:

Advanced studies in macroeconomics help to understand the problems of developing countries such as poverty, inequalities of income and wealth, differences in the standards of living of the people, etc. It suggests important steps to achieve economic development.

5) Performance of an Economy:

Macroeconomics helps us to analyze the performance of an economy. National Income (NI) estimates are used to measure the performance of an economy over time by comparing the production of goods and services in one period with that of the other period.

6) Study of Macroeconomic Variables:

To understand the working of the economy, the study of macroeconomic variables are important. The main economic problems are related to the economic variables such as behaviour of total income, output, employment, and general price level in the economy.

7) Level of Employment :

Macroeconomics helps to analyze the general level of employment and output in an economy.

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