What is Macro Economics - Meaning - Importance - Limitations

Previously, we studied about Micro Economics but here, we will take into account another important branch of Economics i.e., Macro Economics.

Micro Economics is the study of the economy as a whole. We study aggregate demand, aggregate supply, National Income, General Price Level, Aggregate Output, Total Consumption, Savings and Investment of the entire economy.

Macro Economics Importance / Significance

1. It helps us in the economic development because it tells us how an economy grows i.e., how to the aggregate demand is determined in order to proper utilize one product’s supply. How to determine Exchange Rate and increase exports and decrease imports of a country.

2. We take into account of the whole economy and not see the individual performance of some units that are growing well but overall the economy is in depression phase.

Limitations of Macro Economics

1. It sees the economy as whole and hence ignore the welfare of individual human beings. For instance, if the National Income is increasing at the expense of a poor people’s income and they only small amount of total income that is not enough to live a standard life, then it is not a moderate policy. Macro Economics should see the welfare of all the human beings and not see only the welfare of some rich people that leads to high National Income.

2. Similarly, in case of General Price Level that is stable but in some individuals units like in Cotton industry, dairy farming, the general price level is high which is affordable for poor people, so ignore individual units progress and see only the General Price Level that is stable can not give us true and clear picture of every individual units operating in the whole economy.

So, we can say that Macro Economics analyze the economy as a whole. However, it should take into account the welfare of some individuals units of the economy for the welfare of all the factors or production.