Importance of Macroeconomics

Macroeconomics is a subject of the utmost importance. It uses aggregative approach in explaining the overall level of economic activity-the levels of economic activity-the levels of output and employment, the level of price, and the rate of economic growth.

Understanding of Economic System

Macroeconomics is very essential for understanding the functioning of the economic system. Modern economic system is complex and complicated. It involves the study of aggregates like national income, aggregate output, national expenditure, gross saving and investment. It is only through the study of these aggregates that we can understand the working of a complex economic system.

Economic Policies

Macroeconomic analysis helps in proper formulations of economic policies. The economic policies for the removal of poverty, unemployment and stabilization must necessarily be based upon the aggregative requirements. It become easier for a government to regulate and control aggregate variables like general price level, output, etc., rather than to regulate and control price and output of an individual firm of industry. Accurate and reliable statistics of the aggregative variables are the first prerequisite for the formulation of sound government policies.

National Income Concept

One of the significant concepts of macroeconomic analysis is national income. The estimates of national income can be used to measure the performance of an economy in an aggregate sense and these allow us to compare the performance with the past.

Inflation and Deflation

Inflation can be described as a situation marked by a continuous increase in the price level. In contrast, the phenomenon of deflation is associated with a steady and sustained fall in the price level. Both these concepts are related to the price level.

International Comparisons

Macroeconomics provides necessary information for international comparisons. For example, consumption and saving between different countries requires macroeconomic information.

Development of Microeconomic Theories

The study of macroeconomics is indispensable even for the purpose of building and developing microeconomics. For example, the law of diminishing marginal utility could not have been formulated without the macro-investigation. Thus, no microeconomic law can be formulated without a pre-study of the aggregates bearing unit.

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