Macroeconomics

Definition of Economics
Lord J.M Keynes, the defines economics as the “study of the administration of scarce resources and of the determination of income and employment.”
Benham defines economics as “a study of the factors affecting the size, distribution and stability of a country’s national income.”
Division of Economics
The modern economists divided economics into:
Microeconomics, and
Macroeconomics.
1. Microeconomics
Microeconomics considers economy as units of smaller parts

Microeconomics studies the behaviour of:
Individual production factors (Land, labourers, capitalists, entrepreneurs),
Individual industries (textiles, iron, steel, transport, etc)
Consuming units (individual consumers and households)
Production units (firms, farms, businesses)
Flow of factors of production (land, labour, capital) from resource owners to business firms, and
Flow of goods and services from business firms to consumers

Macroeconomics studies:
How NI, GDP, employment, demand and supply, general level of price, etc are determined
What causes fluctuation in the NI, GDP, employment, price level
How economies grow, and
How maximum employment and income could be achieved?
Development of Macroeconomics
Macroeconomics theories have been developed mainly in the Post-Keynesian period
It is further developed in the last 70 years after the World War II

2.1 Function of Macroeconomics
Followings are the functions macroeconomics:
It helps understanding the fluctuation of economic development
It provides a bird’s eye view of the national economy and economic world
Microeconomics helps formulate policies for growth and stability of the economy
It is helps to regulate aggregate employment and national income
It helps plan national economic growth rate
It is useful to plan national wage policy
It helps understanding economy in its dynamic aspect

2.2 Limitation of Macroeconomics
Macroeconomics ignores the individual actors of the economy, however, individual welfare is the main aim of economics
So, increasing national savings at the cost of the individual welfare cannot be wise
Macroeconomics overlooks individual differences
For example, the general price level may be stable, but price of food grains can ruin the poor

4. Major Economic Challenges and Problems
Challenges
Major economic problems and best possible use of resources
Ensure maximum satisfaction for consumers
Maximum profit for producers

Problems
Followings are major problems are:
What is to produce?
How to produce?
For whom to produce?
Are the resources economically used?
How full employment is to ensure?
How satisfactory efficiency of national economy could be achieved?
How satisfactory growth could be achieved?