Meaning and Definitions of Macro Economics

Introduction 

The term ‘macro’ was first used in economics by Ragner Frisch in 1933. But as a methodological approach to economic problems, it originated with the mercantilists in the 16th and 17th centuries. They were concerned with the economic system as a whole. From the 18th century physiocrats to modern economists have contributed to the development of macro economic analysis. But credit goes to Keynes who finally developed a general theory of income, output and employment in the wake of the great depression. 

Definitions of Macro Economics

Macro economic is concerned with aggregates and averages of the entire economy. Such as national income, output, total employment, total consumption etc. In other words, macro economics studies how the aggregates and averages of the economy as a whole are determined and what causes fluctuations in them. From the theoretical reasoning and on the basis of empirical reasoning and knowledge the old assumption of full employment is not valid and therefore, it is very vital that we should investigate how these aggregates are determined and how to ensure maximum level of income and employment.

Macro economics has been defined in various ways, they are: 

• "Macro economic theory is the theory of income, employment, prices and money". 

• "Macro economics is that part of economics which studies the overall averages and aggregates of the system". 

• "Macro economics is the study of the forces of factors that determine the levels of aggregate production, employment and prices in an economy and their rates of change over time". 

• Prof. Gardner Ackley defines, macro economics thus: "Macro economics itself with such variables as the aggregates volume of output of an economy, with the extent to which its resources are employed, with the size of national income, with the general price level". 

It is evident from the above definitions that the subject-matter of macro economics is to explain what determines the level of total economic activity, that is, the size of the national income and employment and fluctuations in it in the short-run. It also explains what causes the general price level to rise and determines the rate of inflation in the economy. 

Macro economics deals with how an economy grows, it analyses the chief determinates of economic development and the various stages and process of economic growth. The problem of increasing productive capacity and national income in the long run. The problem of increasing productive capacity and national income over time is called the problem of economic growth. Thus, what determines rate of growth of an economy is also the concern of macro economics. 

The justification of a separate macro approach to the study of several economic problems lies in the fact that micro approach is not only inadequate but may lead to misleading conclusions. In economics, what is true of the parts is not necessary true of the whole. After all, the problem of the aggregates is not merely a matter of adding or multiplying what happens in respect of the various individual parts of the economy. It may be quite different and far more complicated than a mere summation or multiplication.

Notes provided by Prof. Sujatha Devi B (St. Philomina's College)

Meaning and Definition of Economics

People’s economic wants are of a very large number and they are also diverse in character. Biologically humans need only air, water, food, clothing and shelter. But in contemporary society we also seek many goods and services associated with comfortable or affluent standard of living. 

Fortunately, society is blessed with productive resources-labour and managerial talent, tools and machinery, land and mineral deposits-that are used to produce goods and services. This production satisfies many of our economic wants and occurs through the organizational mechanism called the economic system, or, more simply, the economy. 

The blunt reality, however, is that our economic wants far exceed the productive capacity of our limited or scarce resources. So, the complete satisfaction of society’s economic wants is impossible. This unyielding truth provides our definition of economics:”It is the social science concerned with the efficient use of scarce resources to achieve the maximum satisfaction of economic wants”. 

Over the last half-century the study of economics has expanded to include a vast range of topics. The major definitions of economics are: 

•  Explores the behaviour of the financial markets, including interest rates and stock prices. 

• Examines the reasons why some people or countries have high incomes while others are poor and suggests ways that incomes of the poor can be raised without harming the economy. 

• Studies business cycles-the ups and downs of unemployment and inflation-along with policies to moderate them. 

• Studies international trade and finance and the impacts of globalization. 

• Looks at growth in developing countries and proposes ways to encourage the efficient use of resources. 

• Asks how government policies can be used to pursue important goals such as rapid economic growth, efficient use of resources, full employment, price stability, and a fair distribution of income. 

If we boil down all these definitions, we find one common theme, that is,’ 

“Economics is the study of how societies use scarce resources to produce valuable commodities and distribute them among different people.”


Notes provided by Prof. Sujatha Devi B (St. Philomina's College)