MACRO-ECONOMICS OR THE THEORY OF INCOME AND EMPLOYMENT
Macro-economics deals also with how an economy grows. In other words. it analyses the chief determinants of economic development and the various stages and processes of economic growth. This part of economic theory has been largely developed in the last two-three decades.
Economic growth is a long-run problem and as·such it is a post-Keynesian development as Keynes was per-occupied with short-run problem of economic fluctuations. It was Harrods and Comer who extended the Keynesian analysis to the long-tun problem of growth and stability. The theory of economic growth has greatly developed these’ days. General growth theory applies to both developed and under – developed economies. But special growth theories have been propounded for accelerating the growth of under-developed economies. Theory of growth is in fact. long-run macro-economics. The justification of a separate macro approach to the study of several economic problems lies in this micro approach is not only inadequate but may lead to altogether misleading conclusions. In Economics. what is true of the parts is not necessarily true of the whole. After all. the problem of the aggregate is not merely a matter of adding or of multiplying what happens in respect Of the various individual parts of the whole. It may be quite different and far more complicated than a mere summation or multiplication. Take the example of saving. In times of depression. while savings by an individual maybe beneficial’ to him, saving on the part of the entire community will deepen the depression further.
Utility or Macro that macro-analysis has come to reasons. The macro-approach ways:
(a) It is helpful in under functioning of a complicated econ mic S) tern, gives a bird’s eye view of the economic world. Microanalysis, i.e., study of individual a. pects of the economy will lead us nowhere. Undoubtedly, the economy is more important than the individual.
(b) For the formulation of useful economic policies for the nation. macro-analysis is of the significance. Economic policies cannot be obviously based on the basis of the fortunes of a single finn or even a single industry or the price of an individual commodity. It is Car more fruitful to regulate aggregate employment and national income and to work out a national wage policy.
Llmlted of Analysis. Macro Analysis has limitations of its own:
(a) individual is ignored altogether. It is individual welfare which is the main aim of Economics. Increasing national saving at the expense of individual. welfare is not a wise policy.
(b) The macro-analysis overlooks individual differences. For instance. the general price level maybe stable, but the prices of foodgrains may have gune spelling ruin to the poor. A steep rise in manufactured articles may conceal a calamitous fall in agricultural prices. while the average prices were steady.