1 Chapter - I Macroeconomics

“study of the administration of scarce resources and of the

determination of income and employment.”

Benham defines economics as “a study of the factors affecting the size, distribution and stability of a country’s national income.”

Division of Economics

The modern economists divided economics into:
Microeconomics, and
Macroeconomics.

1. Microeconomics
Microeconomics considers economy as units of smaller parts

entrepreneurs),
Individual industries (textiles, iron, steel, transport, etc)
Consuming units (individual

consumers and households)
Production units (firms, farms, businesses)
Flow of factors of production (land, labour, capital) from resource owners to business firms, and
Flow of goods and services from business firms to consumers

of price, etc are determined
What causes fluctuation in the

NI, GDP, employment, price level
How economies grow, and
How maximum employment and income could be achieved?

Development of Macroeconomics

Macroeconomics theories have been developed mainly in the Post-Keynesian period
It is further developed in the last 70 years after the World War II

the fluctuation of economic development
It provides a bird’s eye

view of the national economy and economic world
Microeconomics helps formulate policies for growth and stability of the economy
It is helps to regulate aggregate employment and national income
It helps plan national economic growth rate
It is useful to plan national wage policy
It helps understanding economy in its dynamic aspect

economy, however, individual welfare is the main aim of economics

So,

increasing national savings at the cost of the individual welfare cannot be wise

Macroeconomics overlooks individual differences

For example, the general price level may be stable, but price of food grains can ruin the poor

possible use of resources
Ensure maximum satisfaction for consumers
Maximum profit for

producers

whom to produce?
Are the resources economically used?
How full employment is

to ensure?
How satisfactory efficiency of national economy could be achieved?
How satisfactory growth could be achieved?

the principal issues of economic analysis or what are problems

and challenges of economic management?
Do you support that state should intervene in the economic activities. Why?