Why is macroeconomics an important field of study

How should we participate in a democracy as responsible, informed citizens? We cannot answer such questions without having a proper understanding of economics.

It is a basic civic literacy requirement. It teaches us how to make choices, how to interact in society, how to evaluate the work being done by our elected representatives and much more. Every citizen in a country needs to know economics so as to live and participate meaningfully in the society. Not just demand and supply Economics underpins many of the phenomena unfolding around us every day.

From driving Jio to offering free internet along with phone services and the use of box office earnings to determine the next Bollywood star, economics also determines the price and the variety of mango you will choose to buy once the monsoon arrives. India needs more of its citizens educated about the basic principles of economics so that they can understand the forces that materially move and determine the markets and prices around them.

As the Indian economy becomes more sophisticated and more connected with the rest of the world, the demand for economists in government, business and policy-making will rise. India has weathered more than seven decades of economic mismanagement, borne largely out of widespread economic illiteracy. Economics: The Basics There are two major branches of economics: Microeconomics Macroeconomics In short, microeconomics is the study of individual economic units of the economy, while macroeconomics is the study of the economy as a whole and its totality.

According to classical economics: An economy as a whole always functions at a level of full employment, due to free play of market forces in a free economy. Supply creates its own demand. Macroeconomics addresses the desire to control business cycles in advancing economies and the need to develop backward economies. The Meaning of Macroeconomics Macroeconomics is the study of the aggregates and averages of the entire economy.

The scope of macroeconomics include the following theories: National income Money Economic growth Employment Price levels The studies of problem of balance of payment, unemployment, general price level are the parts of macroeconomics, as these relate to the economy as a whole.

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.

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 microeconomic theory to the problems that require us to look at the economy as a whole. Comments Matern on July 02, very nice short but very clear keep it up Rashid on June 17, What is a national income figure?

Ndekhedehe Divine on April 23, Very correct and accurate. Thanks for the information. Gideon Haruna on January 30, very good ideas Krishi dugar on January 29, Thank you for such good answers Ayman on January 20, Absolutely parfect thank 2 mach Bakoyogo Charles b on November 13, All are the best answers Bishal Baral on November 09, thanks for information..

Berhanu utura on September 27, It is very best difinition. Antoine on June 23, Thanks you very much about this information. Shikha on April 25, Thank you so much for providing such information.

Keep on reminding us to enhance our knowledge. Ravi on March 18, Its useful naresh on March 03, why aishwarya ray profile pic.. The theory of economic fluctuations can be understood and built up only with the help of macroeconomics, for here we have to take into consideration aggregate consumption, aggregate saving and investment in the economy.

Thus, we are led to analyse the causes of fluctuations in income, output and employment, and make attempts to control them or at least to reduce their severity.

Macroeconomic approach is of utmost importance to analyse and understand the effects of inflation and deflation. Different sections of society are affected differently as a result of changes in the value of money. Macroeconomic analysis enables us to take certain steps to counteract the adverse influences of inflation and deflation.

It is the study of macroeconomics which has brought forward the immense importance of the study of national income and social accounts. In micro-economy such a study was relegated to the background. Another way to see the importance of macroeconomics is to look at its use in collecting statistics regarding the business cycle of a given country. This involves a periodic review of the rate of demand for finished goods and services. Such a review normally occurs on a quarterly basis and is an important component of the GDP.

This part of macroeconomics is really crucial because when the demand for goods and services increases within a business cycle, it is also reflected in the GDP level — which also usually increases as a result. Economists and governments frequently use macroeconomic principles to study the growth of the GDP when they are formulating monetary policies.

These sorts of policies are often sort of like budgets for governments and government divisions; they set out rules about how money should be spent, and usually also include accountability measures to be sure that money coming in and going out is being both recorded and transparently disclosed.