Limitations of macro economics
- The macro economies ignore the welfare of the individual. For instance, if national saving is increased at the cost of individual welfare, it is not considered a wise policy.
- The macro-economics analysis regards aggregates as homogeneous but does not look into its internal composition. For instance, if the wages of the clerks fall and the wages of the teachers rise, the average wage may remain the same.
- It is not necessary that all aggregate variables are important. For instance, national income is the total of individual incomes. If national income in the country goes up, it is not necessary that the income of all the individuals in the country will also rise. There is a possibility that the rise in national income may be due to the increase in the incomes of a few rich families of the country.
- The macro-economic models are designed mostly to suit the developed countries of the world. The developing countries face different economic realities, so they do not benefit much from them.
The following should be noted in the above meaning of the national income. The first is that National income has a time dimension i.e it is measured per period of time (one year) national income.
Secondly, in National income there is flow of goods and services. Money is used a common denominator. Depreciation of used capital assets must be taken into account while computing national income.