what is the importance of macroeconomics?

Reply Sun 2 Aug, 2015 08:09 pm
what is the importance of macroeconomics?
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Reply Sun 2 Aug, 2015 08:20 pm
Macroeconomics is important because it allows the public to understand the economy as a whole, facilitating decisions relating to firms, fiscal policy and global economic policy. Macroeconomics gives academics, policy makers and other interested individuals a view into the relationship between factors such as unemployment, income and inflation. By studying trends in the macroeconomy, countries are able to prevent disasters such as recessions and depressions
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Reply Wed 5 Aug, 2015 01:25 am
Whereas microeconomics is concerned with individual markets, macroeconomics looks at the economy at a national, regional and global level. Important factors of study within macroeconomics include business cycles, output, inflation and unemployment.
Business cycles indicate the direction the economy is taking. Downward movement in GDP is indicative of recession. Output refers to the value of everything that a country produces in a given time period. The study of output gives insight into the effects of education and technology. Inflation is the general price increase in a country.
Understanding inflation and deflation is vital to policy makers because deflation can lower economic output, while inflation decreases purchasing power. Analysis of unemployment provides an understanding of the condition of sectors within the economy, informing policy that stimulates job growth.
Macroeconomics also observes the relationship between the economy and monetary and fiscal policy. It makes it possible to know whether acts of government and central banks are effective or not.
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Reply Wed 5 Aug, 2015 03:56 am
The theoretical and practical importance of macro economics is briefly discussed as:
1. It is helpful in understanding the functioning of macro economics system.
2. It explains the factors which determine the level of national income and employment in an economy.
3. It explains the circular flow of national income in an economy.
4. It explains the problem of unemployment which is a main problem of developing countries.
5. It explains the various aspects of international trade such as terms of trade balance of payments, foreign exchange etc.
6. It studies the causes of fluctuations in the business cycle and to formulate the policies to control inflation and deflation.
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Reply Thu 6 Aug, 2015 02:47 am
The Importance of Macroeconomics

Why is macroeconomics important? Here are a few crucial reasons:

It helps us understand the functioning of a complicated modern economic system. It describes how the economy as a whole functions and how the level of national income and employment is determined on the basis of aggregate demand and aggregate supply.

It helps to achieve the goal of economic growth, a higher GDP level, and higher level of employment. It analyses the forces which determine economic growth of a country and explains how to reach the highest state of economic growth and sustain it.

It helps to bring stability in price level and analyses fluctuations in business activities. It suggests policy measures to control inflation and deflation.

It explains factors which determine balance of payments. At the same time, it identifies causes of deficit in balance of payments and suggests remedial measures.

It helps to solve economic problems like poverty, unemployment, inflation, deflation etc., whose solution is possible at macro level only (in other words, at the level of the whole economy).

With a detailed knowledge of the functioning of an economy at macro level, it has been possible to formulate correct economic policies and also coordinate international economic policies.

Last but not least, macroeconomic theory has saved us from the dangers of application of microeconomics theory to the problems that require us to look at the economy as a whole.
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