Your Ultimate UPSC Study Material To Crack IAS Exam

Comprehensive content tailored For Success

Macroeconomics- Indian Economy Notes: NCERT Notes UPSC

Apr 5, 2022

Navigate Quickly

Distinction Between Microeconomics and Macroeconomics

Importance of Macroeconomic Studies

The Emergence of Macroeconomics

Interesting Points

Macroeconomics- Indian Economy Notes

Distinction 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

Importance of Macroeconomic Studies

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: 

  • The markets did not or could not exist. 
  • The markets existed but failed to produce an equilibrium of demand and supply. 
  • In a large number of situations, society (or the State, or the people as a whole) had decided to pursue certain important social goals unselfishly (in areas like employment, administration, defence, education and health) for which some of the aggregate effects of the microeconomic decisions made by the individual economic agents needed to be modified. 

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:

The Emergence of Macroeconomics

  • Macroeconomics emerged as a separate subject in the 1930s due to John Maynard Keynes, a British economist.
  • The classical school of thought, before Keynes, believed that all the labourers who are ready to work will find employment and all the factories will be working at their full capacity. 
  • However, the Great Depression of 1929 and the subsequent years saw the output and employment levels in the countries of Europe and North America fall by huge amounts. It affected other countries of the world as well. 
  • Demand for goods in the market was low, many factories were lying idle, workers were thrown out of jobs and the unemployment rate touched new heights.
  • These events led to the persistent development of macroeconomic frameworks explained by Keynes. 
  • His approach was to examine the working of the economy in its entirety and examine the interdependence of the different sectors. 

Useful links for UPSC IAS preparation:

Colonialism and the Countryside: Exploring Official Archives- NCERT Notes UPSCPopulation: Distribution, Density, Growth and Composition- NCERT Notes UPSCElection and Representation- NCERT Notes UPSCMigration: Types, Causes and Consequences- NCERT Notes UPSC 
Indian Constitution: Why and How? - NCERT Notes UPSCFundamental Rights in the Indian Constitution- NCERT Notes UPSCHuman Geography: Nature and Scope- NCERT Notes UPSCCraft Heritage of India- NCERT Notes UPSC

Interesting Points

  • Today, the economic system of most developed countries is capitalistic in nature, where the production activity is mainly carried out by capitalist enterprises. 
  • A typical capitalist enterprise has one or several entrepreneurs, who exercise control over major decisions and bear a large part of the risk associated with the enterprise.
  • Factors of Production:  They are the inputs required for the production of goods and services. The factors of production are capital, land, labour and entrepreneur.
  • Revenue: The money that is earned by enterprises by selling goods and services is called revenue.
  • Profits: It is the earnings of the entrepreneurs. It is the part of the revenue that remained after the payments of rent (on land), interest (on capital) and wages (on labour). 
  • Investment expenditure: It is the expenditure made out of profits in buying new machinery or building new factories so that production can be expanded. These expenses raise productive capacity.

Download the PrepLadder app to study from India’s top UPSC faculty and transform your UPSC CSE preparation from the Beginner level to the Advanced level. You can also join our Telegram channel for UPSC coaching and to stay updated with the latest information about the exam.

Own Your Dream

Team PrepLadder

Auther Details

PrepLadder IAS

Get quick access to the latest happenings across the globe. Articles revolving around factual data that aims to boost your UPSC CSE preparation and make your dreams become a reality!