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. 

  1. Theory of National Income
  2. Theory of Employment
  3. Theory of Money
  4. Theory of International Trade

  • 7

  microeconomics and macroeconomics  are intertwined and are the fundamental tools to learn and understand how the economic system functions. Also, the changes in the policies of macroeconomics govern the microeconomics and affect the prices and hence the whole economy. This in turn affects the purchasing power of the individuals.

Macroeconomics takes a broader approach and studies the behavior of the economy as a whole. It does not focus on the just the company but covers entire industries and the economies. It concentrates on the total output of a nation and how a nation allocates its limited resources like labor, land and capital to  maximize production levels, instill and promote growth and facilitate trade. Macroeconomics takes into account economy-wide phenomenon such as the GDP (Gross Domestic Product) and how it is affected by the changes in national income, unemployment, rate of growth and consumer price indices.

Soryy I didn't Type it myself since I am in quite a bit of hurry so had to copy from a pdf I had.
Hope this answers it .
 

CHEERS.


 

  • -2
What are you looking for?