The importance of studying macroeconomics can identify as follows. (1) Understand the economy as a whole, (2) Identifying functioning of an economy, (3) Helps to the formulation of economic policies, (4) Understanding macroeconomics, (5) Understanding and controlling economic fluctuations, (6) Identifying inflation and deflation situation, (7) Study of national income, (8) Study of economic development, (9) Identifying performance an economy, (10) Identifying Nature of material welfare.
1. Help us understand the economy as a whole
In microeconomics, we study the individual economic units like a household, an industry, and a firm. But in macroeconomics, we study the whole economic system. It includes national income, total savings, and investment, level of total employment, total demand, total supply, quantity of money, public investments, public expenditure, general price level, taxation, government budget, etc.
We study how this overall economy is determined and what fluctuations could be happened in them. The major objective of the study is to understand the reason for the fluctuations and how governments get decisions to resolve these fluctuations.
2. Help to identify the functioning of an economy
Macroeconomics analysis gives us an idea of the functioning of an economic system. Studying macroeconomics is very essential for proper and accurate knowledge of the behavior pattern of the whole economy.
A large and complex economic system is impossible in terms of numerous individual items so governments have to handle their economic system as a whole. So, having enough knowledge about macroeconomics will be easier for them.
Using the macro-economic theories, we can identify the functioning of an economy and it helps to take economic decisions and can identify what should do in the future as well.
3. Help with the formulation of economic policies
Macroeconomics is very essential for the formulation of economic policies. The government does not deal with individuals but with groups. It establishes the importance of macroeconomics studies. It helps the government to solve economic problems and take economic decisions like poverty, unemployment, business cycle, etc.
As well as the analysis of macroeconomics theories helps the economists and the government to figure out the causes and possible solutions to such macro-level problems. Macroeconomics helps us to analyze and identify the cause leading to depression and unemployment. Also, it helps to follow the policies to deal with such a situation as well.
This reflect ability to formulate correct economic policies and coordinate international economic policies with a broad knowledge of the functioning of an economy at the macro level.
4. Help to understand macroeconomics
The study of macroeconomics is essential for the proper understanding of microeconomics. In microeconomics always study an individual concept about the economic system.
For example, the theory of individual firms cannot formulate with the behavior pattern of one single firm. Theory can only formulate after examining and analyzing the behavior of several companies.
5. Help to understand and controlling economic fluctuations
Economic fluctuations could happen in any economic system and it is a characteristic feature of the capitalist form of society. It is help for prevent for any financial crisis or any long- term negative situations.
The theory of economic fluctuations can understand only with the help of macroeconomics. The study of macroeconomics provides the ability to analyze control and reduce the causes of income, output, and employment in an economy.
In brief, studying macroeconomics helps to bring stability in price level and analyses fluctuations in business activities. It suggests policy measures to control inflation and deflation.
6. Help to identified inflation and deflation situation
This is also the most valuable situation that should be measure in an economy. In Macroeconomics we can get knowledge about this concept and it helps to analyze and understand the effects of inflation and deflation.
As a result of changes in the value of money this will be affected differently in different sections of society. In Macroeconomic analysis, we can take a certain step to control the adverse influences of inflation and deflation.
As well as, macroeconomics concerns the impact of the reserve bank in the economy, the inflow and outflow of capital, and its effects on job rates. The frequent change in the value of money caused due to inflation and deflation diversely affect the economy.
By concerning the economy as a whole, this situation can control by using fiscal and monetary policy.
7. Help to study national income
The importance of studying national income and social accounts was highlighte in the study of macroeconomics. Without a study of national income, it would not be possible to identify that one-third of the world’s income suffers from poverty. Therefore, a correct economic policy cannot formulate without a study of national income.
The study of various factors such as revenue, expenditure, budgeting, etc is done in calculating the national income. It is also possible to gain an understanding of income distribution among citizens by calculating national income under a macroeconomic study.
For these reasons, it is further clear that the study of macroeconomics is more important.
8. Help to study economic development
This is also a very important concept that considers in the macroeconomic study. As a result of the study the development concept in macroeconomics, it could be paying more attention to the problem of development of underdevelopment countries.
Macroeconomics has identified changes in the flow of wealth in different countries, as well as changes in the living conditions of people. Under macroeconomics, important steps need to be taken to address these issues and promote their economic well-being. Macroeconomics theories help economists solve such problems.
Therefore, we can see that, macroeconomics helps a lot to deal with different economic conditions and to open the door to economic growth.
9. Help to identify the performance of an economy
Studying macroeconomics helps us to understand and analyze the performance of an economy. It shows the result-oriented study of an economy in terms of actual and factual achievements.
Gross National Product (GNP) of National Income (NI) estimates are used to measure the performance of the economy over time by comparing the production of goods and services in one period. In other periods the composition of GNP gives information about the quantum of the contribution of each sector of the economy to GNP.
Such studies can identify how macroeconomics theories can be very helpful in studying the performance of an economy.
10. Help to identify the nature of material welfare
Macroeconomics helps us to study the nature and size of the material welfare of the nations. The problem of measuring social welfare is not easy. Those interested in material and social welfare should study the issues in their macroeconomic background.
This adds to the importance of macroeconomics because the main objective of the studies of economics has become the study of macroeconomics. Someone who looks forward to contributing to the welfare of society needs to study macroeconomics.
Macroeconomics is also an important concept that considers the whole nation and works for the welfare of the economy.
By studying this article, you can identify the importance of studying macroeconomics and how it helps to government and economists to make economic decisions.
Further Reading
Introduction to Macroeconomics
4 Phases of Business Cycle|Definition, Phases, Diagram
Main Theories of Inflation (With Diagram)
Circular Flow of Economic Activity
