INTRODUTION OF MACRO ECONOMICS

      Till the great depression of 1930,all economists were engaged in formulating principles relating to the allocation of scarce resources.Earlier,they were assuming full employment as a normal situation of an economy.They devoted their time to micro economics with aggregate output to be constant.Thier major emphasis was on the determination of individual price and output levels.At the same time classical economists namely RICARDO,MARSHALL and PIGOU talked about aggregate behaviour of the economy or the study of individuals behaviour.Thus,they mainly concerntrated on micro economic policy.

       In 1930,two events stimulated the study of macro economics.First,great depression demonstrated that full employment was unstable.In U.S.A. unemployment rate which was 2.9% in 1929 jumped to24.9% in 1933.Moreover,in the same period,GNP declined by about 30%.It indicated that unemployment rate and aggragate output were variables.therefore,economists felt the need to study the factors that determine the level of output and employment.

        Secondly.in 1936,Lord Keynes published the genral theory of employment,intrest and money.In this book,Keynes analysed that unemployment could exist for long period.He analysed that unemployment and depression.He concluded that unemployment occurs due to deficiency of aggregate demand.It can be removed by raising the level of aggregate demand.Many economists accepted Keynesian economics.Therfore ,the publication of his book and subsequent adoption of his veiws are often reffered to as Keynesian revolution.