Question

Do you agree with the following statement? Give reason.

Macroeconomics is a partial equilibrium analysis.

Options

• Agree

• Disagree

Answer 1

I disagree with the above statement.

Reasons:

1. Macroeconomics is concerned with the entire economy in terms of equilibrium. Macroeconomics is thus a general equilibrium study.
2. Macroeconomics examines the behaviour of several aggregate economic variables at the same time, taking into consideration their functional link and interdependence.
3. The general equilibrium approach to macroeconomics assumes that everything is dependent on everything else. The macroeconomic approach, for example, describes how the equilibrium of aggregate supply and aggregate demand influences not only the price level but also the amount of national income and employment.

As a result, macroeconomics is a general equilibrium analysis rather than a partial equilibrium analysis.