Apr 05, 2022
Macroeconomics attempts to study the ‘macro’ (meaning ‘large’) phenomenon affecting the economy as a whole. It usually simplifies the analysis of how the country’s total production and the level of employment are related to attributes, also called variables, like prices, rate of interest, wage rates, profits, etc.
In simple terms, macroeconomics studies the behaviour of the entire economy such as the aggregate output levels of all the goods and services in an economy, general price levels of goods and services, employment level in different production units, etc.
Macroeconomics forms an indispensable part of the UPSC exam preparation and hence should be studied in detail. Before proceeding further let's first understand the difference between Microeconomics and Macroeconomics.
|It studies the behaviour of the individual or small economic agents.||It tries to address situations facing the economy as a whole.|
|It studies the demand and supply of individual market segments.||It studies the aggregate effects of the forces of demand and supply in the economy.|
|It focuses on consumers' choices, tests and preferences and income.||It focuses on consumption levels in an economy and national income.|
|The decision-makers are any individuals, firms, households, business units, etc.||Macroeconomic policies are pursued by the State itself or statutory bodies like the Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI) and similar institutions.|
|The ultimate goal is profit maximisation.||The ultimate goal is macroeconomic stabilization.|
Note: Even a large company is ‘micro’ in the sense that it had to act in the interest of its own shareholders which was not necessarily the interest of the country as a whole.
Important read: Economic Survey 2023 | Top 20 Key Highlights
Adam Smith, the founding father of modern economics, had suggested that if the buyers and sellers in the market take decisions based on their own self-interest, there is no need to think of the wealth and welfare of the country as a whole separately. But it was found that in some cases:
Therefore, it is crucial to study the effects of taxation and other budgetary policies, money supply, interest rates, wages, employment and output in the market.
Upgrade and enhance your UPSC CSE Economy preparation with PrepLadder's Hinglish video lectures. Watch a detailed video on Fixed & Floating Exchange Rate Systems by Vivek Singh Sir, our DREAM TEAM faculty for Economy and give an edge to your UPSC coaching:
Useful links for UPSC IAS preparation:
|Colonialism and the Countryside: Exploring Official Archives- NCERT Notes UPSC||Population: Distribution, Density, Growth and Composition- NCERT Notes UPSC||Election and Representation- NCERT Notes UPSC||Migration: Types, Causes and Consequences- NCERT Notes UPSC|
|Indian Constitution: Why and How? - NCERT Notes UPSC||Fundamental Rights in the Indian Constitution- NCERT Notes UPSC||Human Geography: Nature and Scope- NCERT Notes UPSC||Craft Heritage of India- NCERT Notes UPSC|
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