Limitations of Macroeconomics


Although macroeconomics deals with all the national problems and provides various measures, it signifies various national contemporary situations; it has some limitations in practical field. They are –

►   Fallacy of composition: Sum total of individual activities is aggregate economy. But what is true for individual may not be true for whole economy. For e.g.

Individual (desirable)      Whole (not)     Result

Saving                                  Saving          I↓     epm↓     O↓

Deposit                                  Deposit        I↓    emp↓     O↓

Withdraw                               Withdraw         inflation, whole banking system fail

►   Macroeconomics always looks the aggregative aspect: If high level and technical employment decreases and manual and blue color jobs rise, macroeconomic data remain unchanged but economy affected.

►   Statistical and conceptual difficulties: Macroeconomic policies totally depend upon statistical details. If source of data is not reliable and randomly selected, the policies applied to overcome problems lead the wrong results.

►   Aggregate variables may not be important necessarily: A rise in national income does not mean rise in all individual income. So, an economy as a whole is to be focused.

►   Wrong use may mislead the economy:  Critical and care less use of macroeconomic variables may mislead the economy for e.g. any policy for whole economy may not be right for all sectors and vice versa. This may bring unfavorable results.

►   Trade- off relations between goals:

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