Macroeconomics

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Question: What is Macro economic Model? How to use this method in practice? Answer: given current knowledge, Macroeconomics is the study of the behavior of the economy as a whole. It examines the forces that affect many firm, consumer and workers at the same time.

Scope

The importance/issues/scope, which are addressed in macro economics are in brief as under:

• It helps in understanding the determination of income and employment. Late J.M. Keynes laid great stress on macro economic analysis. He, in his revolutionary book, "General Theory, Employment interest and Money", brought drastic changes in economic thinking. He explained the forces or factors which determine the level of aggregate employment and output in the economy.

• 'Economic growth: The macro economic models help us to formulate economic policies for achieving long run economic growth with stability. The new developed growth theories explain the causes of poverty in under developed countries and suggest remedies to overcome them.

• Determination of general level of prices. Macro economic analysis answers questions as to how the general price level is determined and what is the importance of various factors which influence general price level.

• Income shares from the national income. Mr. M. Kalecki and Nicholas Kelder, by making departure from Ricardo theory, has presented a macro theory of distribution of income. According to these economists, the relative shares of wages and profits depend upon the ratio of investment to national income.

• Global economic system. In macro economic analysis, it is emphasized that a nation's economy is a part of a global economic system. A good or weak performance of a nation's economy can affect the performance of the world economy as a whole.

Purpose

   * Purpose defines the specific information need of the decision-making and the research question that is asked.

Boundaries

   * Boundaries define which parts of the reality are taken into the assessment and which are excluded within 
     spatial, temporal and other dimensions.

Scenarios

   * Scenarios define particular conditions that are of interest irrespective whether they describe 
     reality or not (e.g. what-if scenarios).

Intended users

   * Intended users are those for whom the assessment is made.

Participants

   * Participants are those who may participate in the making of the assessment. 
     The minimum group of people for a successful assessment is always described. 
     If some groups must be excluded, this must be explicitly motivated.

Definition

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Decision variables

   * Decision variables: decisions that are considered.

Indicators

   * Indicators: outcome variables of interest.

Value variables

   * Value variables: value judgements (usually about indicators).

Other variables

   * Other variables: any variables that link to the causal network and are within the boundaries of the assessment.

Analyses

   * Analyses: statistical and other analyses that contain two or more variables, e.g. optimizing.

Indices

   * Indices: lists of particular locations along spatial, temporal, or other dimensions. 

Result

   * Results of indicators and assessment-specific analyses. 

Conclusions

   * Conclusions are based on the results, given the scope.