What is Macroeconomics?

Managerial economics is a branch of economics which is applied in decision making. It has developed many tools, techniques, and methods to solve the business-related problems.

And thus the application of the economics to solve the business related problems can be termed as managerial economics.

Managerial economics can be further classified as microeconomics and macroeconomics. If you want to know the what is macroeconomics. Then your search will end here. Because in this article of mine, I will tell you about the meaning of the macroeconomics and the limitations.

What is Meaning of Macroeconomics?

What is Macroeconomics?

Macroeconomics is a branch of economics which studies multiple decision making units in a whole. Whereas the microeconomics studies individual decision making units. In other words, the macroeconomics is a study of the economic system as a whole.

Importance of Macroeconomics

Importance of Macroeconomics

Macroeconomics is a very useful branch of economics and has quite an importance.

1) Formation and Execution of Economic Policies.

Macroeconomics is very useful in the formation and execution of the economic policies. Government intervention in economic activities has been increasing day by day.

The government can not deal with a particular unit but it has to deal with the group of the units. This is the reason why macroeconomics is important while formation and execution of the economic policies.

2) Understanding Microeconomics Becomes Easier.

The study of macroeconomics makes the microeconomics easy to understand. Every microeconomics is based on the macroeconomic study. In order to understand the microeconomic facts, one should properly study macroeconomics.

3) Functioning of the Economy.

It is also helpful in getting an idea of how complex economic system functions. It helps us getting proper and more accurate knowledge regarding the functioning of the economy.

4) Study of Economic Development.

Macroeconomics helps us to study the economic growth of a country. It enables us to understand the problems of the developing and the underdeveloped countries.

By analyzing the problems of a country with the help of macroeconomics we can take some initiatives and actions to promote their economic development.

5) Nature of Material Welfare.

It helps us to study and understand the material welfare of a nation. The importance of this is enhanced further because the main objective of the study of the economics itself is for the welfare of the society.

If it helps us to solve the problems then its utility is definitely higher in our practical life.

Limitations of Macroeconomics

Limitations of Macroeconomics

The limitations are as mentioned below.

1) Excessive Generalization.

The greatest disadvantage is that it is likely to indulge in excessive generalization from individual experiences to the system as a whole. Aggregates and averages may not always affect all the sectors of the economy.

2) Aggregates must be homogeneous and Meaningful.

In macroeconomics, we take the things in terms of aggregates. But they must be homogeneous and meaningful. For example, 5 apples + 5 apples becomes 10 apples. It is a meaningful aggregate.

But 5 apples + 5 oranges may be considered as fairly meaningful aggregates.

By showing 5 apples + 5 skyscrapers is equal to 10 will become a meaningless aggregate. So we are considering it as a foolish outcome of the excessive generalization.

3) The Aggregates must not reveal the characteristics of individual units.

Since the aggregates are the total sum of the individual units it does not reveal the characteristics of the individual units.

For example, the prices of some goods are increased whereas the prices of others are decreased. The aggregates may not show any changes in the price level even though individual prices have been changed much.

4) The Aggregates must be interesting and functionally related.

The aggregates chosen for the study of the macroeconomics must be interesting and mutually consistent. The aggregates will be significant and interesting only when they are functionally related.

If the aggregates are uninteresting and not functionally related. That is the time when the macroeconomics will lose its importance.

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So this was about what is macroeconomics along with its meaning, importance, and limitations. I hope you are clear with all the information mentioned in this guide. But if you have any kind of doubts in your mind then you can comment down below.