Explain the interdependence between Micro and Macro economics giving suitable illustrations.
Answers
Explanation:
Actually micro and macroeconomics are interdependent. The theories regarding the behaviour of some macroeconomic aggregates (but not all) are derived from theories of individual behaviour. ... Similarly, the theory of aggregate consumption function is based upon the behaviour patterns of individual consumers.
.1 study of economic fluctuations:-Business cycles which are universal in every sector,are influnced by both individuals and aggregate factors.Unless we reveiw both micro and aggergate variables,we can not provide an appropriate solution to business cycles.Therfore to study trade cycles micro and macro economics contribute significantly.
2. Balance of payments and interdependence:-Balance of payments problem is also a burning problem for individual sector may have favourable balance of payments whereas other sectors,unfavourable balance of payments.On the other hand.the overall position of an economy is to be assessed from aggregate position of all sectors.
3.Role in international trade:-In international trade both the approches are used.Economists have developed their theories on the basis of micro economics presuming full emplyoment of resources and mobility of factors mof production.However,modern economists looked on the economy as a whole and recognised the role of genral equlibrium is nothing but an extension of equlibrium of micro economics.
4. Basis of economic laws:-Micro economics acts as a basis macro economics because macro is an aggregate of individual units.The success and accuracy of aggregates depends on the individual units.Similarly,macro theories are used by micro economists.
5.Theory of tariffs:-Many economists have propounded that modern macro approaches of imposing tariffs with the intenstion of correcting balance of payments position is virtually based on the theory of monopoly.So micro economics has influenced the modern macro economics theory.
Answer:
Actually micro and macroeconomics are interdependent. The theories regarding the behaviour of some macroeconomic aggregates (but not all) are derived from theories of individual behaviour. ... Similarly, the theory of aggregate consumption function is based upon the behaviour patterns of individual consumers. make me as thanfull and foll me