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Karnataka 2nd PUC Economics Question Bank Chapter 7 Introduction To Macro Economics

2nd PUC Economics Introduction To Macro Economics One Mark Questions and Answers

Question 1.
What is Macro economics?
Answer:
Macro-economics refers to the study of aggregates covering the entire economy, such as General price, General employment, National Income, Inflation etc.

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Question 2.
Who traced Macro economics first?
Answer:
The mercantalists traced Macro economics first.

Question 3.
What do you mean by ‘laissez faire’ policy?
Answer:
It is the policy to leave the economic activities to market. Here the role of Government is minimum. It also refers to minimum intervention of Government in economic activities.

Question 4.
Which policy was proved wrong by the Great Depression?
Answer:
The Great depression of 1930 proved that the Classical Economic Policy was wrong.

Question 5.
Name the book written by J.M.Keynes.
Answer:
J.M.Keynes wrote ‘The General Theory of Employment, Interest and Money’.

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Question 6.
Who laid the foundation for modern Macro-economics?
Answer:
J.M.Keynes laid the foundation for Macro economics.

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2nd PUC Economics Introduction To Macro Economics Two Marks Questions and Answers

Question 1.
What do you mean by nature of Macro-economics?
Answer:
The way of solution to economic problems is called nature of macro economics. The nature of macro economics explains the central essence of economy. It includes all economic activities and helps to understand how an economy functions in different situations.

Question 2.
Name any two areas of study under Macro economics.
Answer:
Areas of Macro-economics study are National Income. Aggregate employment, inflation, Investment etc.

Question 3.
Who were the pioneers in Micro and Macro economics?
Answer:
Alfred Marshall and John Maynard Keynes were the pioneers in Micro and Macro economies respectively.

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Question 4.
How does Macro economics depend on Micro economics?
Answer:
Usually, Macro economic variables depend on Micro economic variables in an economy. For instance, Aggregate demand function is the sum of individual demand function. Hence, Macro economics depends on Micro economics.

Question 5.
Define Macro Economics.
Answer:
According to P.A.Samuelson, Macro Economics is ‘The study of the behaviour of the economy as a whole, it examines the overall level of nation’s output, employment, prices and foreign trade’.

Question 6.
Mention any four limitations of Macro Economics.
Answer:

  1. Danger of excessive generalizations.
  2. Neglect of Micro Economics.
  3. Does not prove clear picture of an economy.
  4. Statistical and conceptual difficulties.

2nd PUC Economics Introduction To Macro Economics Five Marks Questions and Answers

Question 1.
Distinguish between Micro and Macro Economics.
Answer:
Micro and Macro economics are distinguished on the following grounds:
Scope: Micro Economics studies in individual units so its scope is narrow.
Macro Economics studies in aggregates, so its scope is wider.

Method of study: Micro economics follows slicing method as it studies individual unit Macro Economics follows lumping method as it studies in aggregates.

Economic Agents: In Micro Economics, each individual economic agent thinks about its own interest and welfare.
In Macro Economics, economic agents are different among individual economic agents and their goal is to get maximum welfare of a country.

Equilibrium: Micro economics studies the partial equilibrium in the country. Macro Economics studies the general equilibrium in the economy.

Domain: Micro economics consists of theories like consumer’s behaviour, production and cost Rent. Wages, Interest, etc.

Macro economics comprises of theory of income, output and employment. Consumption function, Investment function, Inflation, etc.

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Question 2.
Discuss the circumstances for the emergence of Macro Economic study.
Answer:
According to R.G.D.Allen, the term ‘Macro economics’ applies to the relation amongst broad economic aggregates. It is the study of aggregates such as total employment, unemployment, national income, national output, total investment, total consumption, etc.

The emergence of modern Macro economics got a turning point in 1936 when J.M.Keynes published his book, ‘The General Theory of Employment, Interest and Money’. The economic thoughts before 1930, were dominated by classical economists like Adam Smith, J.B.Say, and others. They had maximum faith on Laissez Faire policy i.e., minimum intervention of Government. More scope was given to free economic activities and invisible hands to ensure equilibrium and full employment.

In 1930, USA had to face a great economic depression, which proved that the classical economic policy is wrong and necessitated the new economic policies and interpretation and analysis of Macro-economics. J.M.Keynes gave a fresh and revolutionary approach through his book ‘General Theory’. Macro economic approach came into existence during this juncture. The same was supported by neo-classical Macro economics, supply side economics and neo- Keynesian economics.

Question 3.
What are the limitations of Macro-Economics? Or ‘Although Macro-economics has gained maximum popularity, yet it is not free from limitations’. Justify this statement.
Answer:
Macro economics is the study of aggregates. It provides valuable information about different economic activities. But it is not free from defects or limitations. They main limitations of Macro economics are as follows:

  • Excessive generalization of facts: The major limitation of Macro economics is its excessive generalization of facts. What is true of an individual.component may not be true in case of aggregate.
  • To regard Aggregates as homogeneous: The main defect in Macro analysis is that it regards the aggregates as homogeneous without caring about their internal composition and structure.
  • It does not provide a clear picture: The study of Macro economics does not provide clear picture about the economy. It analyses the economy in a brief manner instead of detailed study. So it does not provide a clear picture.
  • Statistical and conceptual difficulties: The measurement of macroeconomic concepts involves a number of statistical and conceptual difficulties. These problems relate to the aggregation of micro economic variables.
  • Problem of Aggregation: The economic aggregates become immeasurable and incomparable in real terms. So, it is very difficult to provide aggregate values of a particular variable.
  • Macro economics is based on imaginary inferences: The conclusions drawn from aggregate tendency may not be true in case of individual study. For example, a general rise in price brings different situations for different sections of society.
  • Macro-economics depends on Micro economics: Macro economic variables depend on the behaviour of Micro economic variables in the economy. Aggregate demand in the economy is simply the sum of demand at the micro level.

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2nd PUC Economics Introduction To Macro Economics Ten Marks Questions and Answers

Question 1.
Discuss the nature and scope of Macro-economics.
Answer:
Macro economics explains the central theme of the economy. It studies the economic activities as a whole. It is useful to understand functioning of an economy in different situations. The way of solution is called the nature of Macro economics.

The nature of Macro economics is discussed as under:

  • Macro economics deals with how to generate and spend the income through production of goods and services.
  • It deals with how to allocate the human resources and natural resources in different economic sectors to increase the level of GDP.
  • It provides information about how and what policies regarding production, income, expenditure be formulated for the growth and development of an economy.
  • It considers the formulation of relevant policies towards foreign trade for the benefit of the entire country.
  • Macro economics helps us to know how the different variables like output level, price level and employment level bear close relationship.

The scope of Macro economics:

The scope of Macro economics means the study of areas under macro-economics. The Macro-economic approach includes the wide range of economic variables like national income, aggregate employment, money general price level, aggregate demand and supply, consumption. investment, etc. They are the important components of the subject matter of Macro economics.

  • It includes Major Sectors: The economy has many interdependent sectors like household sector, producer sector, Public sector, external sector. Each sector plays a significant role in an economy.
  • Study of National Income: In Macro economics, we study National Income and the concepts of National Income. Here we study GDP, GNP, NNP, NDP, Personal Income etc.
  • General Theory of Employment: The theory of employment includes the determinants of employment and unemployment. It studies the factors like aggregate demand, aggregate supply, aggregate consumption, aggregate savings etc.
  • Theory of general price: Inflation and deflation are the important ingredients of Macro economics. It provides information about rise and fall in general price levels.
  • Demand and supply of Money: Macro economics studies the demand and supply of money and their impact on the level of employment and production. It includes monetary policies, fiscal policies, foreign policy etc.
  • Study of International Trade: The Macro economics studies international trade. The international trade deals with export, import, exchange rate and balance of payment.

Thus, the scope of Macro economics is wider and studies the factors that retard growth and those which bring the economy on the path of economic development.

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