How are microeconomics & macroeconomics interdependent? Explain with an example.
What does macroeconomics theory deal with? Give examples.
Both Microeconomics and Macroeconomics are interrelated and interdependent on each other. The behaviour of micro variables (a single unit or a single variable) depends on the behaviour of macro variable (aggregate variables). For instance, the wage rate in one particular industry will depend on the wage rate prevailing in the economy as a whole.
Similarly, macro variables also depend on the behaviour of the micro variables. For instance, the aggregate demand in the economy is the sum total of individual demand for goods and services in the economy.
Macroeconomics deals with how economy as a whole operates. It focuses on the aggregate measures such as Aggregate Demand, Aggregate Supply, Aggregate Price Level, etc. It studies how these variables are determined and how they change over time. It helps in understanding various economic problems and economic relations at the economy or aggregate level. Some of the important Macroeconomic theories are as follows.
- Theory of National Income
- Theory of Employment
- Theory of Money
- Theory of International Trade