Question

Why is there a need for a separate theory of macroeconomics? Explain with the help of macroeconomics paradoxes.

Answer 1

Answer:

Keynes's General Theory

Keynes's theory was brought together both monetary and real economic factors for the first time, explained unemployment, and suggested policy achieving economic stability. Keynes contended that economic output is positively correlated with money velocity.

Therefore, a separate macro-analysis is needed to study the behaviour of the economic system as a whole as well as in respect of various macroeconomic aggregates. When laws or generalisations are true of constituent individual parts but untrue and invalid in case of the whole economy, paradoxes seem to exist.