CBSE Class 12 Economics

## What macroeconomics studies **Macroeconomics** studies the economy as a whole. It deals with aggregates such as total output, the general price level, total employment, aggregate saving and investment, and the balance between exports and imports. **Microeconomics** studies how individual units, a single consumer, a single firm or a single market, decide and interact. The two approaches ask different questions about the same economy. Microeconomics asks why the price of wheat rose, which is a question about one market. Macroeconomics asks why prices in general rose, or why total output fell, which are questions about the whole economy at once. A conclusion that holds for one unit does not always hold for the whole: if a single household saves more, it becomes richer, but if every household saves more and spends less, total demand falls, firms sell less and total income falls. Macroeconomics is also concerned with the working of government policy. Fiscal policy (taxes and government spending), monetary policy (the supply of money and credit) and the external sector (trade and exchange rates) are all tools whose effects are aggregate. ## Goods Goods are classified by what happens to them in production and use, and the classification matters because national income counts only some of them. ### Consumption goods and capital goods **Consumption goods** satisfy wants directly. Bread, a bus ticket, a haircut and a television in a living room are consumption goods or services…