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Macro economics explains the central theme of the economy. It studies the economic activities as a whole. It is useful to understand functioning of an economy in different situations. The way of solution is called the nature of Macro economics.

The nature of Macro economics is discussed as under: 

• Macro economics deals with how to generate and spend the income through production of goods and services. 
• It deals with how to allocate the human resources and natural resources in different economic sectors to increase the level of GDP. 
• It provides information about how and what policies regarding production, income, expenditure be formulated for the growth and development of an economy. 
• It considers the formulation of relevant policies towards foreign trade for the benefit of the entire country. 
• Macro economics helps us to know how the different variables like output level, price level and employment level bear close relationship. 

The scope of Macro economics:

The scope of Macro economics means the study of areas under macro-economics. The Macro-economic approach includes the wide range of economic variables like national income, aggregate employment, money general price level, aggregate demand and supply, consumption. investment, etc. 

They are the important components of the subject matter of Macro economics.

• It includes Major Sectors: The economy has many interdependent sectors like household sector, producer sector, Public sector, external sector. Each sector plays a significant role in an economy. 
• Study of National Income: In Macro economics, we study National Income and the concepts of National Income. Here we study GDP, GNP, NNP, NDP, Personal Income etc.
• General Theory of Employment: The theory of employment includes the determinants of employment and unemployment. It studies the factors like aggregate demand, aggregate supply, aggregate consumption, aggregate savings etc.
• Theory of general price: Inflation and deflation are the important ingredients of Macro economics. It provides information about rise and fall in general price levels.
• Demand and supply of Money: Macro economics studies the demand and supply of money and their impact on the level of employment and production. It includes monetary policies, fiscal policies, foreign policy etc.
• Study of International Trade: The Macro economics studies international trade. The international trade deals with export, import, exchange rate and balance of payment.

Thus, the scope of Macro economics is wider and studies the factors that retard growth and those which bring the economy on the path of economic development.

Robbins considered economics as a human science.

Mehta has defined Economics as, “a science which studies human behaviour as a means to end wantlessness.

(c) Physical Science

Empirical Science

Robbins thinks economics to be a an empirical science because it does not make any judgement regarding good and evil, but studies a situation just as it is.

(c) Adam Smith

Correct Answer is: (b) Pigou

(c) Scarcity-centered definition

Professor. J.K.Mehta

1. (h) 

2. (f) 

3. (j)

4. (c) 

5. (i) 

6. (a) 

7. (d) 

8. (g) 

9. (e) 

10. (b)

According to J.B.Say, ” Economics is the science which studies wealth.”

Correct Answer is: (a) Scarce

(c) Samuelson

• More focus on wealth : In these definitions, more focus was laid upon wealth. Wealth was accepted as a goal of life, while gain of wealth is merely a resource and not an end, by which humans fulfill their wants. 
• Imagination of human wealth : According to ancient economists, humans work either by getting motivated to earn wealth or due to self-interests. However, this thought is wrong. In fact, humans not only work by getting motivated to earn wealth, rather, they also work by getting motivated by other human feelings (like compassion, love and tolerance etc.)

lonely, vigorously, constantly, completely, strongly, unlikely, greatly, immediately, broadly.

Due to excessive emphasis on the study of wealth, many confusions had arisen about economics. It was infened from that perspective that economics assunes man is to be attrected only by money. But in the beginning of the 19th century, some economists said that money is only a means for human life, so it is an inappropriate analysis of economics.

Correct answer is (c) strong

(c) show offs

Even when there is no breeze, their road-chested, slim-waisted leave will spin like tops determined to attract your attention and invite you into the shade.

There was a difference between one party domination in India and Mexico. In Mexico, this was a one party system only not dominance because: 

1. In India, the Congress party dominated on behalf of popular consensus but Institutional Revolutionary Party (PRI) (in Spanish) ruled on behalf of perfect dictatorship. 

2. In India, free and fair elections took place, where the losing of election was also fair but it Mexico, elections were based on malpractices, dominated by PRI.

“An essay on Nature and Significance of Economic Science.”

1. Resources 

2. Necessities

Micro and Macro economics are distinguished on the following grounds: 

Scope: Micro Economics studies in individual units so its scope is narrow. Macro Economics studies in aggregates, so its scope is wider. 

Method of study: Micro economics follows slicing method as it studies individual unit Macro Economics follows lumping method as it studies in aggregates.

Economic Agents: In Micro Economics, each individual economic agent thinks about its own interest and welfare. In Macro Economics, economic agents are different among individual economic agents and their goal is to get maximum welfare of a country.

Equilibrium: Micro economics studies the partial equilibrium in the country. Macro Economics studies the general equilibrium in the economy.

Domain: Micro economics consists of theories like consumer’s behaviour, production and cost Rent. Wages, Interest, etc.

Macro economics comprises of theory of income, output and employment. Consumption function, Investment function, Inflation, etc.

There was a difference between one party domination in India and Mexico. In Mexico, this was a one party system only not dominance because: 

1. In India, the Congress Party dominated on behalf of popular consensus but Institutional Revolutionary Party (PRI) (in Spanish) ruled on behalf of perfect dictatorship. 

2. In India, free and fair elections took place, where the losing of election was also fair but in Mexico, elections were based on malpractices, dominated by PRI. 

In our opinion one party dominance like India is better because this sort of dominance: 

1. Accommodates social diversities. 

2. Encourage large number of participation. 

3. Ensures democratic spirit as well as maintains the same. 

4. Bear respect even for opposition.

Mrs. Barbara Wotten.

“An Enquiry into the Nature and Causes of Wealth of Nations.”

Economist like Prof. Adam Smith, J.B.Say. Walker, etc.have given the wealth centred definitions.

According to R.G.D.Allen, the term ‘Macro economics’ applies to the relation amongst broad economic aggregates. It is the study of aggregates such as total employment, unemployment, national income, national output, total investment, total consumption, etc.

The emergence of modern Macro economics got a turning point in 1936 when J.M.Keynes published his book, ‘The General Theory of Employment, Interest and Money’. The economic thoughts before 1930, were dominated by classical economists like Adam Smith, J.B.Say, and others. They had maximum faith on Laissez Faire policy i.e., minimum intervention of Government. More scope was given to free economic activities and invisible hands to ensure equilibrium and full employment.

In 1930, USA had to face a great economic depression, which proved that the classical economic policy is wrong and necessitated the new economic policies and interpretation and analysis of Macro-economics. J.M.Keynes gave a fresh and revolutionary approach through his book ‘General Theory’. Macro economic approach came into existence during this juncture. The same was supported by neo-classical Macro economics, supply side economics and neo- Keynesian economics.

Correct option is (1) a, b and c

The classical economists believed that the ultimate purpose of man’s economic actions is to make money.

The components of ASEAN Vision 2020 can be summed up as follows: 

1. An outward looking role in the international community. 

2. To encourage negotiations over conflicts in tie region. 

3. To mediate to end the conflicts i.e. Cambodian conflict, East Timor Crisis, annual discussion on East Asian Cooperation through meetings.

Macro economics is the study of aggregates. It provides valuable information about different economic activities. But it is not free from defects or limitations. 

They main limitations of Macro economics are as follows:

• Excessive generalization of facts: The major limitation of Macro economics is its excessive generalization of facts. What is true of an individual.component may not be true in case of aggregate.
• To regard Aggregates as homogeneous: The main defect in Macro analysis is that it regards the aggregates as homogeneous without caring about their internal composition and structure. 
• It does not provide a clear picture: The study of Macro economics does not provide clear picture about the economy. It analyses the economy in a brief manner instead of detailed study. So it does not provide a clear picture. 
• Statistical and conceptual difficulties: The measurement of macroeconomic concepts involves a number of statistical and conceptual difficulties. These problems relate to the aggregation of micro economic variables. 
• Problem of Aggregation: The economic aggregates become immeasurable and incomparable in real terms. So, it is very difficult to provide aggregate values of a particular variable. 
• Macro economics is based on imaginary inferences: The conclusions drawn from aggregate tendency may not be true in case of individual study. For example, a general rise in price brings different situations for different sections of society. 
• Macro-economics depends on Micro economics: Macro economic variables depend on the behaviour of Micro economic variables in the economy. Aggregate demand in the economy is simply the sum of demand at the micro level.

Correct option is (1) d

1. Danger of excessive generalizations. 

2. Neglect of Micro Economics. 

3. Does not prove clear picture of an economy. 

4. Statistical and conceptual difficulties.

According to P.A.Samuelson, Macro Economics is ‘The study of the behaviour of the economy as a whole, it examines the overall level of nation’s output, employment, prices and foreign trade’.

1. Difficult to even think about the existence of a want less person. 

2. The concept of maximum happiness is not correct

WTO and India: India is the founding member of the WTO. India favours multilateral trade approach. It enjoys MFN status and allows the same status to all other trading partners. India benefited from WTO on following grounds:

1. By reducing tariff rates on raw materials, components and capital goods, it was able to import more for meeting her developmental requirements. India’s imports go on increasing.

2. India gets market access in several countries without any bilateral trade agreements. 

3. Advanced technology has been obtained at cheaper cost. 

4. India is in a better position to get quick redressal from the trade disputes.

5. The Indian exporters benefited from wider market information.

The following are the impacts of industrial policies of government. 

i) Rise in the number of industrial units: Today nearly 2 lakh large factories and 3 crore small factories are operating in India. 

ii) Employment has increased but less than expected: Both small and large scale employ nearly about one-fifth of India’s 460 million workers.

iii) Low salaries and less working conditions: A large section of workers are employed in small units which generally pay very low salary and devoid of workers safety conditions and health benefits.

iv) Production of factory-based goods has increased: Establishment of basic industries resulted in increased production of factory based goods. 

1. The production of coal and lignite has increased from 32 million tons in 1950-51 to 571 million tons in 2010-11. 

2. The production of steel has increased from 10 million tones in 1980-81 to 70 million tons in 2010-11. 

3. There was also a significant increase in the production of crude oil and cement etc.

v) Increase in environmental problems, land conflicts and pollution: 

These industries release a lot of waste materials into the atmosphere and into the tanks and wells causing lots of air pollution and damaging water resources. The air pollution is causing skin diseases and respiratory diseases.

• “Basic” means the things that are basically necessary. 
• The basic necessities for setting up any industries are machines, electricity, minerals and ores and infrastructural facilities like transport, telephones, etc.

The sugar and jaggery mills should be ideally located near the crop grown areas.

• Industrialization means to develop a large number of different factories.
• For industrialization, we have certain basic requirements. 
• They are machines, electricity, minerals and ores and transport facilities.

• Many industrial activities were allowed only for small producers. For example, production of cloth of specific quality was restricted to handlooms. 
• Government made laws so that the large factory owners get prior permission or license to set up factories. This was done so that there would be better planning. 
• The government regulated the quantity of goods produced by factories. 
• The price at which they can be sold was also fixed.

All these restrictions were introduced keeping in view the welfare of the people.

Correct Answer is: (b) Robbins

Marshall’s definition was welfare centred and thus has following criticism.

• Classification of resources on the basis of physical and non-physical nature : Marshall limited the study of subject-matter of economics to the acquisition and consumption of physical resources. But in reality, there are non material resources also like; doctors, engineers, labour, advocates etc, who acquire resources by the of their services and study of these services is done under economics.
• Economics is not social science only : Assuming economics as only social science shall be inappropriate because the rules of economics are such that they apply to people within and outside the society equally. Hence, economics is a human science.
• Relating economics to physical welfare is inappropriate : According to Robbins, economics may be related to anything but it is certain that it is not related to the causes of public welfare. 

Robbins believed the welfare related approach to be faulty on certain grounds.

1. Many activities like production of psychotropic substances and their use is not in the best interest of human welfare, but that is studied as a part of economics. 

2. There is no evidential parameter for welfare. Currency cannot be treated as an evidential parameter for welfare because welfare is a psychological and emotional expression.

• Economics is a Positive Science : When economics is related to welfare, it means that the economists have to decide on pros and cons of economic activities, which relates to normative science. Robbins treats economics as positive science, which does not decide about what is wrong, but rather it studies according to the situation. 
• Scope of economics is skewed : In economics, negligence of the acquisition and consumption of non-physical sources, study of anti social, uncommon and non-economic activities have become the reason for its criticism.

The key elements of development-based definition are the following: 

1. More importance has been given to human habits of selection and limitation of resources (means). 

2. Under the barter system, the problem of distribution of resources (means) has been considered important. 

3. Both Marshall’s and Robbins’ definitions have been included in the developmental (evolutionary) definitions. 

4. The developmental definition has a dynamic perspective.

Limited availability of economic resources.

Correct Answer is: (b) Unlimited

(c) Adam Smith

(c) Mrs. Barbara Wotten