Question

Answer the following question :

What are the features of macroeconomics ?

Answer 1

Following are the features of Macroeconomics :

(i) Study of aggregates : Macroeconomics studies the nation’s economy as a whole. It is a study of wide aggregate variables such as national income, national output, total employment, aggregate demand, aggregate supply, total consumption, total investment, general price level, etc.

(ii) Lumping method : Macroeconomics uses lumping method to deal with macro-variables. Macro variables include aggregate demand, aggregate supply, national output, etc.

(iii) A General equilibrium analysis : Macroeconomic analysis is based on General Equilibrium Analysis. This analysis deals with the entire economy in the context of equilibrium. It studies the behaviour of number of economic variable at a time and takes into consideration their functional relationship and interdependence in doing so. This approach follow the principle of “Everything depends on everything else”. Macroeconomics also explains how aggregate supply is brought into equality with aggregate demand and how equilibrium between them determine the price level as well as the level of income and employment.