Macroeconomics
Topic: Scarcity, Choice and Economic Systems · NCERT: Class 12, Ch 1 "Introduction (Macroeconomics)"; Class 12, Ch 1 "Introduction (Microeconomics)"
Meaning
Macroeconomics studies the economy as a whole. It looks at aggregates, which are totals for the entire economy, such as total output, employment, the general price level, growth, unemployment and inflation. It also studies the links between sectors and the government policies that change market outcomes. It emerged in the 1930s through Keynes's response to the Great Depression. Ragnar Frisch coined the terms "micro" and "macro" in 1933.
Example
The Economic Survey 2025-26 projected India's real GDP growth for FY26 at 7.4%. Studying such national growth, and asking whether the RBI should change interest rates to control overall inflation, are macroeconomic questions.
Don't confuse with
- Microeconomics: Microeconomics studies single markets, consumers and firms. Macroeconomics studies national totals. The two are linked, because individual choices add up to national outcomes.
- Fallacy of composition: This is the mistake of assuming that what holds for one person holds for everyone. In the paradox of thrift, one person can save more, but if everyone saves more, total demand and income fall, so total saving may not rise.
Related concepts
- Positive economic analysis
- Normative economic analysis
- Microeconomics
- Ceteris paribus
- Representative good