USES AND LIMITATION OF MACRO ECONOMICS

Ø  USES AND LIMITATION OF MACRO ECONOMICS
MACRO ECONOMICS

Ø  SHASHI AGGARWAL ECONOMICS AND LAW CLASSES VIDEO LECTURE

• USE OF MACRO ECONOMICS

1. HELPFUL IN UNDERSTANDING THE FUNCTIONING OF THE ECONOMY: IT GIVES BIRD’S VIEW OF THE ENTIRE ECONOMY AS AGGREGATE OUTPUT,INCOME ,CONSUMPTION,SAVING,EMPLOYMENT ETC
2. HELPFUL IN FRAMING AND EXECUTION OF ECONOMIC POLICIES:-MAXIMUM SOCIAL WELFARE IS THE SOLE OBJECTIVE OF MODERN GOVERNMENTS.MACRO ECONOMIC HELP THE GOVERNMENT IN UNDERSTANDING THE MAJOR ISSUES OF ECONOMY AND FRAMING SUITABLE POLICIES
3. STUDY OF ECONOMIC DEVELOPMENT:-IT PROVIDE THE ISSUES AND PROBLEMS OF DEVELOPING NATIONS AND SUGGEST WAYS AND MEANS TO ACCELERATE THE ECONOMIC GROWTH OF THE DEVELOPING NATIONS
4. STUDY OF NATIONAL INCOME:_IT BROUGHT TO LIGHT A GREAT VALUE OF THE NATIONAL INCOME AND SOCIAL ACCOUNTING STUDIES WITHOUT WHICH NO ECONOMIC POLICY OR PLAN CAN BE FORMULATED.
5. STUDY OF TRADE CYCLE: STUDY OF MACRO INCOMES HAS BECOME NECESSITY AND IMPORTANCE TO UNDERSTAND THE CAUSES AND SUITABLE MEASURES TO CHECK ECONOMIC FLUCTUATIONS.
6. CHANGE IN THE GENERAL PRICE LEVEL:-FALL IN THE VALUE OF MONEY IS CALLED INFLATION AND FALL IN PRICE LEVEL IS CALLED DEFLATION.MACRO ECONOMICS HELP IN FRAMING SUITABLE POLICIES TO CORRECT THE IMBALANCES IN THE PRICE LEVEL
7. HELPFUL IN THE STUDY OF MICRO ECONOMICS:-ON STUDY OF THE BEHAVIOR OF CONSUMERS LAW OF DIMINISHING MARGINAL UTILITY WAS DEVELOPED.
8. ESTIMATE OF MATERIAL WELFARE CAN BE JUDGED FROM OVER ALL DEVELOPMENT OF THE ECONOMY NOT FROM THE STUDY OF SINGLE UNITS.
9. INTERNATIONAL COMPARISON:- HELP IN MAKING COMPARISON WITH THE WORLD. LIKE WE CAN COMPARE PER CAPITAL INCOME,INVESTMENT RATE,CONSUMPTION ETC
10. ECONOMIC PLANNING:-IT HELPS IN COMPREHENSIVE PLANNING
11. MACRO ECONOMIC HELPS IN UNDERSTANDING THE INTERRELATION AMONG DIFFERENT SECTORS
12. HELPFUL IN UNDERSTANDING MACRO ECONOMIC PARADOXES:-MACRO ECONOMIC PARADOXES REFERS TO THOSE CONCEPTS WHICH HOLD GOOD FOR INDIVIDUAL BUT WHEN APPLIED TO ALL THE PEOPLE THEIR VALIDITY BECOMES DOUBTFUL

• LIMITATIONS

1. DEPENDENCE ON INDIVIDUAL UNITS:- AS MACRO ECONOMIC DEALS WITH AGGREGATES AND AGGREGATES ARE THE SUM TOTAL OF THE INDIVIDUALS. BUT THE RESULTS OF THE AGGREGATE ARE SOMETIMES DIFFERENT FROM THE INDIVIDUAL BEHAVIOR. MACRO ECONOMIC PARADOXES
2. HETEROGENEOUS UNITS:- NOT POSSIBLE TO MEASURE ALL THE GOODS WITH COMMON. IT IS POSSIBLE TO ADD OR SUBTRACT APPLE WITH ORANGES BUT NOT WITH BUILDING
3. THE COMPOSITION OF STRUCTURES OF THE AGGREGATE IS MORE IMPORTANT THAN AGGREGATE ITSELF:-PROPER STUDY OF AN ECONOMY KNOWLEDGE OF THE THE COMPOSITION OF THE STRUCTURE OF THE AGGREGATE IS AS MUCH ESSENTIAL AS THE AGGREGATE ITSELF
4. IT DOES NOT STUDY THE DIFFERENT  EFFECT OF THE AGGREGATE ON DIFFERENT SECTORS OF THE ECONOMY
5. IT IS DIFFICULT TO MEASURE AGGREGATES
6. IGNORES THE CONTRIBUTION OF INDIVIDUAL UNITS.