Pt 1

Question 1

What is the origin of the term ‘Macroeconomics’?

Answer 1

The term Macro in English has its origin in the Greek term Makros which means Large. In the context of macroeconomics, large means economy as a whole.

Question 2

When did Macroeconomics emerge as a separate branch of economics?

Answer 2

Macroeconomics emerged as a separate branch of economics in 1936 when the British economist John Maynard Keynes published his celebrated book ‘The General Theory of Employment, Interest and Money.’

Question 3

How is Macroeconomics defined?

Answer 3

Macroeconomics is defined as that branch of economics which studies economic issues or economic problems at the level of an economy as a whole.

Question 4

What are the principal issues studied in Macroeconomics?

Answer 4

Employment for the residents, growth of output in the economy, the problem of price rise (inflation), or the problem of depression (lack of demand for goods and services across different sectors of the economy) are the principal issues which come in the ambit of macroeconomics.

Question 5

Is the Union Budget presentation by the Finance Minister a part of Macroeconomic study?

Answer 5

Yes, it is a part of macroeconomic study, as it is related to the economy as a whole.

Question 6

Is the decline in shares of Paytm’s parent firm a part of Macroeconomic study?

Answer 6

No, it is not a part of macroeconomic study, as it is not related to the economy as a whole.

Question 7

How does M.H. Spencer define Macroeconomics?

Answer 7

In the words of M.H. Spencer, ‘Macroeconomics is concerned with the economy as a whole or large segments of it.’

Question 8

What problems does Macroeconomics focus on?

Answer 8

In macroeconomics, attention is focused on such problems as the level of unemployment, the rate of inflation, the nation’s total output and other matters of economy-wide significance.

Question 9

What is the basis of difference between microeconomics and macroeconomics?

Answer 9

1. Level of Study
2. Central Issue
3. Economic Variables
4. Degree of Aggregation
5. Economic Agents
6. Method of Study
7. Assumptions of Study

Question 10

What does microeconomics study?

Answer 10

Microeconomics studies problems of scarcity and choice at the level of an individual, a household, a firm or an industry.

Question 11

What does macroeconomics study?

Answer 11

Macroeconomics studies problems of scarcity and choice at the level of an economy as a whole.

Question 12

What is the central issue in microeconomics?

Answer 12

Allocation of resources is the central issue in microeconomics.

Question 13

What type of variables does microeconomics use?

Answer 13

Microeconomics uses microeconomic variables such as consumer’s demand or producer’s supply.

Question 14

What is the degree of aggregation in microeconomics?

Answer 14

In microeconomics, there is a limited degree of aggregation of economic variables.

Question 15

Who are the economic agents in microeconomics?

Answer 15

At the micro level, economic decisions are taken largely by ‘individual economic agents’ like consumers and producers.

Question 16

What is the method of study in microeconomics?

Answer 16

Method of study in microeconomics is often described as ‘partial equilibrium analysis’.

Question 17

What is the central issue in macroeconomics?

Answer 17

Determination of the overall level of output (and employment) is the central issue in macroeconomics.

Question 18

What type of variables does macroeconomics use?

Answer 18

Macroeconomics uses macroeconomic variables such as aggregate demand and aggregate supply.

Question 19

What is the degree of aggregation in macroeconomics?

Answer 19

In macroeconomics, there is a wider degree of aggregations, as economic problems are studied at the level of economy as a whole.

Question 20

Who are the economic agents in macroeconomics?

Answer 20

At the macro level, economic decisions are taken by ‘institutional economic agents’ like RBI, SEBI, and TRAI.

Question 21

What is the method of study in macroeconomics?

Answer 21

Method of study in macroeconomics is often described as ‘general equilibrium analysis’.

Question 22

What is the micro-macro paradox?

Answer 22

What is logical at the micro level may not be logical at the macro level.

Question 23

Give an illustration of the micro-macro paradox.

Answer 23

If an individual saves more, he adds to his future prosperity. However, if all the people in an economy save more (and spend less), demand for goods and services may decline.