Dr M Manjunath Shettigar Microeconomics: the study of how households and firms make decisions and how they interact in markets Macroeconomics: the study of economywide phenomena, including inflation, unemployment, and economic growth 22 Macroeconomics deals with the study of the economy as a whole and its major aggregates. 3 By Macroeconomy we mean macroeconomic conditions or environment within which businesses have to function. Conditions and quality of macroeconomic environment matter a lot for businesses. While a positive/favourable environment contributes to business growth, business expansion and faster economic growth, a negative/unfavourable business environment will have opposite effect. Macroeconomic environment depends on factors such as: national output and income, aggregate demand and supply, the volume of savings and investment, demand for and supply of money and other financial assets, the price level and changes in it the rate of interest fiscal and monetary policy Economic growth and business cycles, and so on To To To To To achieve sustained economic growth maintain price stability achieve/maintain full employment promote distributive justice maintain balance of payments equilibrium The main macroeconomic problems are 1. Business cycles 2. Inflation 3. Unemployment