DEFINITIONMacroeconomics is the study of the economy as a whole. It captures theinterdependence of the various sectors and units in a given economic system.The focus of macroeconomic analysis is usually to determine the sequence of theconsequence of a given development in one sector on another in the economy.Therefore, to examine the overall performance of an economy, macroeconomic analysisdeals with the broad determination of economy aggregates such: National Income(output), general price level, general level of employment, exchange rate, balance ofpayment equilibrium etc.Macroeconomics also examines factors that determine the level of these aggregatesand the structure of their components.In summary, macroeconomics is the study of aggregates or averages covering theentire economy, such as total employment, national income, national output, totalinvestment, total consumption, total savings, aggregate supply, aggregate demand,and general price level, wage level and cost structure.In other words, it is aggregative economics which examines the interrelations amongthe various aggregates, their determination and causes of fluctuations in them.Apart from the above definitions, macroeconomics also focuses on economic policiesand policy variables that affects the performance of an economy.DISTINCTIONS BETWEEN MACROECONOMICS AND MICROECONOMICSMacroeconomic theory refers to the analysis of the hypothesized relationships betweenaggregate variables in the economy; such as national income, savings, consumptionemployment, exports and imports. On the other hand, microeconomics study thebehaviour of individual economic decision units, the consumers, households, firmsand the way in which their decisions interrelate to determine relative prices of goodsand factors of production, and the quantities which will be bought and sold in themarket economy.The objective of microeconomics on demand side is to maximize utility whereas on thesupply side is to maximize profits at minimum cost while the main objectives ofmacroeconomics are full employment, price stability, economic growth, exchange ratestability and favourable balance of payments.The basis of macroeconomics is national income, output and employment which aredetermined by aggregate demand and aggregate supply. On the other hand, the basisof microeconomics is the price mechanism which operates with the help of demandand supply forces and these forces help to determine equilibrium price and quantity inthe market.DEFINITION OF SOME CONCEPTSVARIABLEThis is a quantity whose magnitude or value can change i.e. a variable is a magnitudethat can take on different values. Examples of such variable frequently used inmacroeconomics include consumption, savings, investment, import, export,government expenditure etc. And we have different types of variable. E.g. stock andflow variables, endogenous and exogenous variables etc.Time dimension is used to distinguish between a stock and a flow variable.Stock variables are measured at a given point in time while flow variables aremeasured over a period of time. For instance, store of cloth in a shop at a point in timeis stock while monthly income and expenditure of an individual are examples of flowvariables.Common stock variables in macroeconomics include; wealth, debt, total bank deposit,inventory, capital stock, savings (total saving in a day) etc. Examples of flow variablesinclude; national income, consumption, investment, wages, saving (by a person withina month), imports, exports, tax payments, dividends etc.An economic model is used also to differentiate between exogenous and endogenousvariables.Given an economic model, a variable is exogenous within that model if its value isdetermined outside the model or the system under consideration. Such variables mayaffect all other variables but its own value is not explained by the model but it is given.It is also known as “independent or explanatory variable.” On the other hand,endogenous variables are those whose values are determined within the model andthus explained by the model. It is also known as “dependent or explained variable.”For example, consider a consumption model given asC = a + bYC (consumption) in the model is the endogenous (dependent) variable because itsvalue is determined within the model.Y (Income) is an exogenous (independent) variable because its value is determined andinfluenced by factors outside the model.PARAMETERSThese are constants that are assumed at a given value in a model. They are factorsinfluencing a given relationship of variables in a model or system and which are notallowed to change in response to the development in the model.In respect of the consumption function above, b is a parameter which represents themarginal propensity to consume (MPC).FUNCTIONS AND EQUATIONSFunctions are relationships that exist between two or more variables such that achange in the value of one variable is related to a change in the values of some othervariables in some regular and predictable manner. For instance, if two variables C andY are so related that for a value assigned to Y, one or more values of C are determined,then, C is said to be a function of Y. It is symbolically given asC = f(Y)C = a + bYEquations are statements that show that what is on the left hand side is equal to whatis on the right hand side. Equality sign (=) are always used:X = 2X + Y = 3