Basic Terms of Macro Economics
Macroeconomics is the branch of economics that deals with broader economic aggregates like national income, unemployment, etc.
The other major branch of economics is microeconomics. Microeconomics is defined as that branch of economics which deals with individual economic agents like a consumer or a firm. It is also called Price Theory. On the other hand macroeconomics is known as Income Theory. There are various utility of the study of macroeconomics like it helps in solving the problems of growth and analyse the causes of unemployment and thus, helps in framing policies in that regard. It explains the business cycle and focuses on international trade. The relationship between microeconomics and macroeconomics is that of interdependence. For example, the National Income is a macroeconomic variable whereas to calculate national income, one has to consider the individual incomes.
In any economic system there are three economic agents namely, Households, Firms and Government. Households are those economic agents which supply factors of production to the firms and receive incomes in return i.e. factor income and use this income to buy various consumer goods. Firms are units producing goods and services with the aim of profit making. Government plays the crucial role and its main objective is social welfare. The other important concepts of macroeconomics are: Production, a process wherein inputs are converted into outputs, Factors of production: the primary inputs required for the process of production, they are land, labour, capital and entrepreneur, Consumption: the use of goods and services for satisfying wants, Capital, which is the stock of asset used for further production, there are various types of capital. Money, a the medium of exchange which is generally acceptable and Income which the owners of the factors of production receive in return for their services in the form of rent, wages, interests and profits.
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