TOPIC :-

MEANING AND
DEFINITION OF
MACROECONOMICS
AND DIFFERENCE
BETWEEN
MACROECONOMICS
AND
MICROECONOMICS

PROJECT WORK
BUSINESS ECONOMICS

SUBMITTED TO :
MS. PRIYANKA
NAME : HARSHITA
MAURYA

SEMESTER : 2 nd
SEMESTER

COURSE : BCOM L.L.B

HONS.

DEPT. : UNIVERSITY
INSTITUTE OF LEGAL
STUDIES (UILS)
SUBJECT : BUSINESS
ECONOMCS II
 ACKNOWLEDGEMENT
I would like to express my heartfelt gratitude
to my project advisor, Ms. Priyanka, for their
guidance, expertise, and unwavering support
throughout this university project. Their
insightful suggestions, valuable feedback, and
encouragement have been invaluable in
shaping the direction and scope of this
project. I am also thankful to my fellow project
team members for their collaboration,
dedication, and collective efforts in making
this project a success.

I would like to acknowledge the university

administration for providing the necessary
resources, research facilities, and academic
support, which have played a crucial role in
the completion of this project. Their
commitment to fostering an environment of
learning and research excellence has greatly
contributed to our academic growth.
Furthermore, I extend my gratitude to my
friends and family for their unwavering
support, understanding, and motivation
during this challenging yet rewarding journey.

TABLE OF CONTENTS
1. ABOUT ECONOMICS
2. MACROECONOMICS: MEANING AND
DEFINITION
3. FEATURES OF MACROECONOMICS
4. SCOPE OF MACROECONOMICS
5. DISTINCTION BETWEEN
MICROECONOMICS AND
MACROECONOMICS.
 WHAT IS ECONOMICS
Economics is a social science that studies
the production, distribution, and consumption of goods
and services. It's the study of scarcity, the study of how
people use resources and respond to incentives, or the
study of decision-making. It often involves topics like
wealth and finance, but it's not all about money.
Economics is concerned with the creation, consumption,
and transfer of wealth. The study of economics
encompasses the major areas of microeconomics, which
explores how people and firms produce and consume
goods and services, and macroeconomics, which explores
mass economic progress and inter-country trade.
Mainstream economic theory relies upon
analytical economic models. When creating theories, the
objective is to find assumptions which are at least as
simple in information requirements, more precise in
predictions, and more fruitful in generating additional
research than prior theories.

Economics has two branches namely:-

Microeconomics which studies the implications of

individual human action, and is key to a person's financial
health and Microeconomics studies the implications of
individual human action, and is key to a person's financial
health.

Macroeconomics analyzes the economy as a system

where production, consumption, saving, and investment
interact, and factors affecting it: employment of the
resources of labor, capital, and land,
currency inflation, economic growth, and public policies
that have impact on these elements.

MACROECONOMICS
DEFINITION:-
Macroeconomics is a branch of economics
that studies the behavior of an overall
economy, which encompasses markets,
businesses, consumers, and governments.
Macroeconomics examines economy-wide
phenomena such as inflation, price levels,
rate of economic growth, national income,
gross domestic product (GDP), and changes in
unemployment.
Some of the key questions addressed by
macroeconomics include: What causes
unemployment? What causes inflation? What
creates or stimulates economic growth?
Macroeconomics attempts to measure how
well an economy is performing, understand
what forces drive it, and project how
performance can improve. Macroeconomics
analyzes all aggregate indicators and the
microeconomic factors that influence the
 economy. Government and corporations use
macroeconomic models to help in formulating
of economic policies and strategies.

FEATURES OF MACROECONOMICS: -
1. Aggregate Analysis : Macroeconomics examines the behavior and
performance of the economy as a whole rather than focusing on individual
markets or sectors. It looks at aggregated variables like total output, total
consumption, total investment, and overall price levels.
2. National Income Accounting : Macroeconomics utilizes national income
accounting to measure the overall economic performance of a country. This
involves the calculation of indicators such as Gross Domestic Product (GDP),
Gross National Product (GNP), Net National Product (NNP), and National
Income (NI).
3. Unemployment: Macroeconomics studies the causes and consequences of
unemployment at the national level. It examines various types of
unemployment (such as frictional, structural, and cyclical) and their
implications for the economy.
4. Inflation: Macroeconomics analyzes the causes, effects, and management
of inflation, which refers to the sustained increase in the general price level
of goods and services over time. It explores the relationship between
inflation, money supply, and aggregate demand.
5. Economic Growth: Macroeconomics investigates the determinants of long-
term economic growth and development. It examines factors such as
technological progress, capital accumulation, human capital development,
and productivity growth.
6. Fiscal Policy : Macroeconomics evaluates the impact of government
spending, taxation, and budgetary policies on the overall economy. It
assesses how fiscal policy can be used to stabilize the economy, promote
growth, and address economic imbalances.
7. Monetary Policy : Macroeconomics examines the role of central banks in
controlling the money supply, interest rates, and credit conditions to achieve
macroeconomic objectives such as price stability, full employment, and
economic growth.
8. Business Cycles : Macroeconomics studies the fluctuations in economic
activity over time, known as business cycles. It analyzes the phases of the
business cycle (such as expansion, peak, contraction, and trough) and
explores the causes and consequences of these fluctuations.
9. International Trade and Finance : Macroeconomics explores the patterns
and effects of international trade, capital flows, exchange rates, and balance
of payments on the domestic economy. It examines issues such as trade
deficits, exchange rate fluctuations, and global economic integration.
10. Policy Implications : Macroeconomics provides insights into the
formulation and implementation of economic policies aimed at achieving
macroeconomic stability, sustainable growth, and improved living standards
for the population.
 SCOPE OF MACROECONOMICS
1. Aggregate Economic Variables : Macroeconomics focuses on
analyzing and understanding aggregate economic variables such as
Gross Domestic Product (GDP), inflation rate, unemployment rate,
national income, aggregate consumption, aggregate investment, and
aggregate savings.
2. Economic Growth and Development : Macroeconomics examines
the determinants of long-term economic growth and development,
including factors such as technological progress, capital accumulation,
human capital development, productivity growth, and structural
transformation of economies.
3. Employment and Unemployment : Macroeconomics investigates the
determinants of employment levels and the causes and consequences
of unemployment. It examines different types of unemployment
(frictional, structural, cyclical) and explores policies to promote full
employment and reduce unemployment rates.
4. Price Stability and Inflation : Macroeconomics analyzes the causes,
effects, and consequences of inflation and deflation. It explores the
relationship between inflation, money supply, aggregate demand, and
supply-side factors, as well as the role of monetary and fiscal policies
in maintaining price stability.
5. International Economics : Macroeconomics includes the study of
international trade, finance, and globalization. It analyzes the
determinants of trade flows, exchange rates, balance of payments,
capital flows, and their impact on domestic economies. It also explores
the implications of international trade and finance for economic
growth, employment, and income distribution.
6. Income Distribution and Poverty : Macroeconomics examines
income distribution patterns and explores the causes and
consequences of income inequality and poverty at the national and
global levels. It evaluates the role of economic policies in addressing
income disparities and promoting inclusive growth.
7. Macroeconomic Models and Analysis : Macroeconomics utilizes
theoretical models and empirical analysis to understand economic
relationships, forecast future economic trends, and evaluate the
impact of policy interventions on key macroeconomic variables.
8. Macroeconomic Policy Coordination : Macroeconomics explores the
challenges and opportunities for coordinating macroeconomic policies
across countries, regions, or economic unions to achieve common
objectives .
 USE OF MACROECONOMICS
1. Policy Formulation and Implementation : Governments and central
banks use macroeconomic analysis to formulate and implement policies
aimed at achieving various economic objectives such as full employment,
price stability, and sustainable economic growth. These policies include fiscal
policy (government spending and taxation) and monetary policy (control of
money supply and interest rates).
2. Economic Stabilization : Macroeconomics helps in stabilizing economies by
identifying and addressing fluctuations in key macroeconomic variables such
as output, employment, and inflation. Policies like countercyclical fiscal and
monetary measures are employed to mitigate the negative effects of
economic downturns (recessions) and overheating (inflationary pressures).
3. Business Planning and Investment Decisions : Firms and investors use
macroeconomic indicators and forecasts to make informed decisions about
production, investment, pricing, and expansion strategies. Understanding the
overall economic environment helps businesses anticipate changes in
demand, costs, and market conditions.
4. International Trade and Investment : Macroeconomics provides insights
into the determinants and implications of international trade and investment
flows. Governments, businesses, and policymakers use macroeconomic
analysis to understand exchange rate movements, trade imbalances, capital
flows, and their impact on domestic and global economic conditions.
5. Resource Allocation and Efficiency : Macroeconomics helps in allocating
scarce resources efficiently by analyzing aggregate supply and demand
conditions across different sectors of the economy. This analysis informs
decisions about resource allocation, production levels, and distribution of
goods and services to maximize societal welfare.
6. Financial Market Analysis : Macroeconomics is used to analyze and
forecast financial market trends, including interest rates, stock prices, bond
yields, and foreign exchange rates. Investors, financial institutions, and
policymakers use macroeconomic indicators to assess risks, make
investment decisions, and formulate monetary and regulatory policies.
7. Evaluation of Economic Performance : Macroeconomics provides
frameworks and indicators for evaluating the overall performance of
economies over time. Metrics such as GDP growth, unemployment rates,
inflation rates, and poverty levels are used to assess the effectiveness of
economic policies and identify areas for improvement.
 LIMITATION OF MACROECONOMICS
1. Dependencies on Individual events
 It is not necessary that what is right for a group, would also
right for other groups or individuals.
2. Heterogenous units
 It is very difficult to measure the aggregates for heterogenous
units.
 Though units are measured in terms of money, its not a true
measure of value in use, it is very difficult to measure the
aggregates for heterogenous units.
3. Structure of the aggregate is more important than
aggregate itself
 The composition of the structure of aggregate influences the
economy is more complex than the aggregate itself
4. Different effects of aggregates
 It does not study different effect of an aggregate on different
sectors of economy
 Aggregates does not have uniform effect on all sectors of an
economy
5. Limited application
 Most of models available in macroeconomics does only have
theoretical significance
6. Ignores contribution of individual units
 As compare to individual units, a group of units is given more
importance in Macroeconomics.
 It is not necessary that what is right for individual person,
would also right for a group.
 For example, an individual can withdraw the amount saved in
a bank at a time but if all individuals do the same, the banks
will have to close down.
7. Difficulty in Measuring Aggregates
 Under macroeconomics, measurement of aggregates becomes
very difficult. The reason is that there are numerous items in a
group, which are sometimes not possible to measure
separately.
 MICRO AND MACRO{Distinguished}
1. Scope:
 Microeconomics: Focuses on the behavior of individual economic
agents such as households, firms, and industries. It examines how
these agents make decisions regarding production, consumption,
pricing, and resource allocation in specific markets.
 Macroeconomics: Focuses on the behavior and performance of the
economy as a whole. It analyzes aggregate economic variables such as
national income, output, employment, inflation, and economic growth.
2. Units of Analysis:
 Microeconomics: Analyzes the actions and interactions of individual
economic units (e.g., consumers, producers) and specific markets (e.g.,
market for a particular good or service).
 Macroeconomics: Analyzes the overall behavior of the entire economy
and aggregates of economic variables across all markets.
3. Focus:
 Microeconomics: Focuses on understanding the allocation of scarce
resources among competing uses at the individual level and how prices
and quantities are determined in specific markets.
 Macroeconomics: Focuses on studying the economy-wide phenomena
such as overall levels of output, employment, inflation, and economic
growth, as well as the factors influencing them.
4. Issues Studied:
 Microeconomics: Studies issues such as consumer behavior, producer
behavior, market structures (e.g., perfect competition, monopoly),
pricing decisions, factors of production, and resource allocation.
 Macroeconomics: Studies issues such as aggregate demand and
supply, national income accounting, business cycles, unemployment,
inflation, fiscal policy, monetary policy, international trade, and
economic growth.
5. Policy Implications:
 Microeconomics: Provides insights into how changes in individual
market conditions (e.g., taxes, regulations) affect the behavior of
economic agents and market outcomes. It informs policies related to
specific markets and industries.
 Macroeconomics: Provides insights into how changes in aggregate
economic variables (e.g., interest rates, government spending) affect
overall economic performance. It informs policies aimed at stabilizing
the economy, promoting growth, and managing inflation and
unemployment at the national level.
 BASIS FOR
MICROECONOMICS MACROECONOMICS
COMPARISON
Meaning The branch of economics The branch of economics that
that studies the behavior of studies the behavior of the
an individual consumer, firm, whole economy, (both national
family is known as and international) is known as
Microeconomics. Macroeconomics.

Deals with Individual economic Aggregate economic variables

variables

Business Applied to operational or Environment and external

Application internal issues issues
Tools Demand and Supply Aggregate Demand and
Aggregate Supply
Assumption It assumes that all macro- It assumes that all micro-
economic variables are economic variables are
constant. constant.

Concerned with Theory of Product Pricing, Theory of National Income,

Theory of Factor Pricing, Aggregate Consumption,
Theory of Economic Theory of General Price Level,
Welfare. Economic Growth.

Scope Covers various issues like Covers various issues like,

demand, supply, product national income, general price
pricing, factor pricing, level, distribution, employment,
production, consumption, money etc.
economic welfare, etc.

Importance Helpful in determining the Maintains stability in the

prices of a product along general price level and
with the prices of factors of resolves the major problems of
production (land, labor, the economy like inflation,
capital, entrepreneur etc.) deflation, reflation,
within the economy. unemployment and poverty as
a whole.
 BASIS FOR
MICROECONOMICS MACROECONOMICS
COMPARISON

Limitations It is based on unrealistic It has been analyzed that

assumptions, i.e. In 'Fallacy of Composition'
microeconomics it is involves, which sometimes
assumed that there is a full doesn't prove true because it is
employment in the society possible that what is true for
which is not at all possible. aggregate may not be true for
individuals too.
 CONCLUSION
Micro and Macro Economics are neither
different subjects, nor they are contradictory,
rather, they are complementary. As every
coin has two aspects – micro and
macroeconomics are also the two aspects of
the same coin, wherein one’s demerit is
others merit and, in this way, they cover the
whole economy. The only important point
which makes them different is the area of
application. As microeconomics focuses on
the allocation of limited resources among the
individuals, the macroeconomics examines
that how the distribution of limited resources
is to be done among many people, so that it
will make the best possible use of the scarce
resources. As microeconomics studies about
the individual units, at the same time,
macroeconomics studies about the aggregate
variables.
Both are of the view that the nation’s
economic welfare is possible only when there
is the best possible utilization of productive
resources. In this way, we can say that they
are interdependent. Further, to have a full
understanding of economics, the study of
both the two branches is pertinent.

BIBLIOGRAPHY
www.investopedia.com
www.vedantu.com
www.shaalaa.com
economictimes.indiatimes.com
www.imf.org