Tuesday, 21 February 2012


Since the publication of J.M.Keynes,"General Theory of Employment,Interest and Money,in 1936,macro economics has gained greater popularity.
   Mankiw has started,"The study of macro economics can illuminated much about the world and that the lessons learned,if properly applied,can make the world  a better place."

    Therefore,the importance of macro economics is explained under:-
1.Functioning of an economy:-Macro economics helps us to understand the functioning of an economy.It gives bird's eye view of the phenomena of economic universe.
2.Behaviour of individual units:-It also helps in understanding the behaviour of individual units.for eg,demand for individual products depends upon aggregate demand in the economy.
3.Indispensable for accurate knowlege:-Macro economics is indispensable for a proper and accurate knowlege of the behaviour patteren of the aggregative variables.
4.Economic planning:-Macro economics is extremly helpfulto the government in formulating of appropriate economic polices for tackling the problems of inflation,balance of payment,over-population,under-production.
5.Study of national income:-In modern era,almost in all countries,it is only through the study of national income that the economic situation of different countries is known.
6.Change in general price level:-Value of money has been undergoing wide of fluctuations during20th century.Fall in the value of money is called inflation whereas rise in the value of money is called deflation.
7.The role of expectations in economics:-expectations refers to hope of profit in future.Investment is goverend by marginal efficecy of capital.Marginal efficency of capital is governed by expected [rofitability.An entrepreneur will make investment only if he is optimistic.At the same time the concept of liquidity preference is also dependent on future expectations.

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