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What are the limitations of macroeconomics

What are the limitations of macroeconomics

Answers

Dana
1. Macroeconomic theory treats the aggregate it deals with as internally homogenous and overlooks the significance of internal composition and structure of such variables.

2. It tends to make generalizations about the whole economy based on small samples, yet the samples may not accurately reflect the overall picture. The propositions that are true for individuals or small groups are not necessarily true for the economy.

3. The aggregates may not be functionally related. In such a case, the macroeconomic policies that are formulated will be erroneous. For example, aggregate consumption will only be useful for analysis if it is functionally related to levels of income, wealth interest rates, capital gains, relative prices, money stock, attitudes and expectations, consumer credit, etc

4. Aggregate models that may be derived to explain the behaviour of the economy may end up not conforming to the real world. For example, the bulk of the macroeconomic theory developed so far has been relevant to developed countries since most models have been constructed in those countries. These models are far from reality in developing countries.
Dana05 answered the question on July 18, 2019 at 19:41

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