Question

3a)What is the scope of study of macroeconomics?

(3b)Is the “central economic problem” of macroeconomics in principle identical to the “central economic problem” of microeconomics? Give a rationale for your answer.

(3c)What is meant by the term “the efficient allocation of scarce resources” in a national economy?

Answer 1

3a)What is the scope of study of macroeconomics?

Macroeconomics is a study of economy as a whole. it studies averages and aggregates of an economy. Example- national income, aggregate demand and aggregate supply. Generally it's scope is to cover:

Economic growth- shown by real per capita income figures.

Economic development : Improvement in standard of living through poverty reduction, Education and health improvement.

Price stability : Inflation, deflation and disinflation studies. It also covers theory of money.

Income equality : Shown by Lorenz curve and Ginni coefficient.

Employment : Employment and unemployment types and figures.

(3b) Is the “central economic problem” of macroeconomics in principle identical to the “central economic problem” of microeconomics? Give a rationale for your answer.

The central economic problems are: What to produce, how to produce and for whom to produce. Both in micro and macro they focus on efficint allocation and distribution but the scale differs. In Micro it is related only to a firm, individual. In Macro it is related to whole economy, state, globe etc.

(3c)What is meant by the term “the efficient allocation of scarce resources” in a national economy?

Resources are limited and wants are unlimited. Resources also have alternative uses. Eg. Land can be used for farming or building a casino. Hence in a minimum social cost maximum social benefits should be created and it needs efficient allocation of resources. It can be achieved through focusing on production, productivity and environmental impact studies.