Macroeconomics is the part of economics that studies about the economy. The unit to deal in macroeconomics is the entire economy rather than a part of the economy. Thus, macroeconomics deals with the economic problems faced by an economy. Here we will briefly discuss the meaning and features of macroeconomics.
Ahuja (2016) states that macroeconomics studies how the large aggregates like total employment, national product, or national income, of an economy and the general price level, are determined. macroeconomics is therefore a study of aggregates. Besides, macroeconomics explains how the productive capacity and national income of the economy increase over time in the long run.
“Macroeconomics deals not with individual quantities but with an aggregate of these quantities, not with individual incomes but with national income, not with individual prices but with price level, not with individual output but with national output.”- K.E. Boulding
“Macroeconomics is the study of the behavior of the economy as a whole. It examines the overall level of national output, employment, prices, and foreign trade.”-P.A. Samuelson
It is cleared from the above definitions that the issue of macroeconomics is to explain what determines the level of total economic activity and fluctuations on it in the short run. It means macroeconomics seeks to explain how the economy’s aggregate output and income, total employment of the resources is determined and what explains the fluctuations in the level of income and employment. In modern times, macroeconomics also looks for those factors which determine the increase in productivity or productive capacity and national income in the long run. This issue is related to or this is called economic growth and thus macroeconomics tries to identify factors responsible for the growth of an economy.
There are some issues like
- Why sometimes economy operates at near full employment level and why other times there is a high degree of unemployment?
- Why is national income higher today than it being in 2010?
- Why does the rate of unemployment in a free market economy go up in a period and fall in another period?
- Why do some countries have higher inflation rates and others maintain price stability?
- What causes altering the period of the boom to recession and depression?
- Why should the government do intervene in the economy?
- What policy should a government adopt to check fluctuations in aggregate economic undertakings?
- What policy should government adore to check inflation, stabilize trade cycles, raise national income, reduce unemployment, and restore equilibrium in the balance of payments?
Answering the above question is the major concern of macroeconomics.
Macroeconomics can be featured with help of the following points (features or characteristics of macroeconomics).
- Macroeconomics is an aggregative economics
- It concerns the behavior of the entire economy.
- Macroeconomics is more normative and so is called policy science as well
- Fiscal policy and monetary policy are its analytical tools
- It is the relatively newly developed aspect of economic sciences especially after the work of John Maynard Keynes in the 1930s
- National income, aggregate demand, total consumption, total expenditure, total saving, total investment, etc. are the major macroeconomic variables.
Therefore, macroeconomics is the study of the behavior and performance of the economy. It studies the association and interaction between forces and factors that determine the level and growth of output, income, and employment of an economy. The meaning and features of macroeconomics create the base for its further area of study.