NCERT Notes for Class 12 Economics Chapter 1 INTRODUCTION TO MACROECONOMICS

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Class 12 Economics Chapter 1 INTRODUCTION TO MACROECONOMICS

NCERT Notes for Class 12 Economics Chapter 1 INTRODUCTION TO MACROECONOMICS, (Economics) exam are Students are taught thru NCERT books in some of the state board and CBSE Schools. As the chapter involves an end, there is an exercise provided to assist students to prepare for evaluation. Students need to clear up those exercises very well because the questions inside the very last asked from those.

Sometimes, students get stuck inside the exercises and are not able to clear up all of the questions.  To assist students, solve all of the questions, and maintain their studies without a doubt, we have provided step-by-step NCERT Notes for the students for all classes.  These answers will similarly help students in scoring better marks with the assist of properly illustrated Notes as a way to similarly assist the students and answer the questions right

NCERT Notes for Class 12 Economics Chapter 1 INTRODUCTION TO MACROECONOMICS

Class 12 Economics Chapter 1 INTRODUCTION TO MACROECONOMICS

 

INTRODUCTION TO MACRO ECONOMICS

MACRO ECONOMICS: It is a branch of Economics which deals with aggregates.The word ‘Micro Economics and Macro Economics’ were first coined by Ragnar Frisch in 1933.John Maynard Keynes is considered as the father of Macro Economics. The main difference between Micro and Macro Economics is shown by the following table.

POINTS OF DIFFERENCE

MICRO ECONOMICS

MACRO ECONOMICS

Unit of study

Individual

Aggregate

Method

Partial Equilibrium

General Equilibrium

View point

Worm’s eye view

Birds eye View

Example

Demand for a pen,salary of a person, utility, cost etc.

National income, aggregate demand, inflation, money supply

EMERGENCE OF MACRO ECONOMICS:

Classical Economists like Adam Smith, David Ricardo, J.B.Say etc. are believed in and argued for ‘ Laisses faire’ and ‘Say’s law of market’. Laissez faire means least intervention of government in the economy.’ Say’s law means “ supply creates its own demand”. They believed the invisible hand’ will ensure equilibrium and full employment. Classical ideas were proved wrong by the Great Depression of 1929-1930 period in USA. During this period unemployment rate rose from 3% to 25% and the aggregate output in USA fell by about 33%.During this period in 1936 John Maynard Keynes published his book ‘The General Theory Of Employment Interest And Money’.According to Keynes “Output of an economy is determined by aggregate demand and aggregate supply”.This is why a new branch of Economics is emerged.It is called Macro Economics. And John Maynard Keynes is considered as the father of Macro Economics.

SCOPE OF MACRO ECONOMICS: The scope of Macro Economics consists of the following.

  1. Theory of National Income.    4. Theory of Employment.
  2. Theory of Inflation.                 5. Theory of Trade Cycles.
  3. Theory of economic growth.  6. Theory of monetary and fiscal policies.

IMPORTANCE OF MACRO ECONOMICS.The study of Macro Economics is important because it is

  1. Helpful to understand the functioning of the economy.
  2. Helpful to compare the various economies.
  3. Useful in planning and forecasting.
  4. Helpful in the formulation of economic policies.

SECTORS IN AN ECONOMY ACCORDING TO MACRO ECONOMIC POINT OF VIEW:

According to Macro economic point of view there are four main sectors in an economy. They are following

  1. FIRMS : Tiny production units in an economy is called firms.Their main motive is to produce goods and services and to sell in market to earn profit.
  2. HOUSEHOLD: A single Individual or group of individuals who takes decisions related to consumption. They consume, save and also pay taxes.
  3. GOVERNMENT:It is the regulatory body of the economy. The role of the government is framing laws, enforcing them and delivering justice.
  4. EXTERNAL SECTOR: If refers to the economic transaction of the domestic economy with the rest of the world. The domestic country may sell goods to the rest of the world. If is called export. The domestic country may buy goods from the rest of the world. If is called import.
  5. LIMITATIONS OF MACRO ECONOMICS: Macro Economics suffers the following limitations.
    1. It cannot be applied to explain individual behaviour.
    2. Conclusions drawn from Macro economic analysis maybe misleading.
    3. Macro economics deals with aggregates. Aggregates may be approximation of realities.
    4. Most Macro Economics magnitudes are subject to errors and ambiguities.

 

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