Why does macroeconomics, for certain purposes, look at the relationships between sectors such as agriculture and industry, instead of only at the economy as a whole?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → The interdependence, or even rivalry, between sectors helps us understand some things much better
Some things are understood better when the economy is seen as distinct sectors that depend on, or even compete with, each other.
Option (1) Microeconomics already studies the economy as a whole, so macroeconomics has to study sectors — Incorrect. Microeconomics studies individual markets, not the economy as a whole.
Option (2) The output levels of goods in different sectors generally move in opposite directions over time — Incorrect. Outputs of different goods generally move together, not in opposite directions.
Option (3) The interdependence, or even rivalry, between sectors helps us understand some things much better — Correct. Agriculture and industry are one example of two such sectors.
Option (4) A single representative good cannot show either a level of production or a level of prices — Incorrect. A representative good does have a production level and a price that reflect the economy’s averages.
NCERT (2026-27): “Introduction … We will see below why, sometimes, we also depart from this useful simplification when we realise that the country’s economy as a whole may best be seen as composed of distinct sectors. For certain purposes the interdependence of (or even rivalry between) two sectors of the economy (agriculture and industry, for example) or the relationships between sectors (like the household sector, the business sector and government in a democratic set-up) help us understand some things happening to the country’s economy much better, than by only looking at the economy as a whole.” “… If we observe the economy of a country as a whole it will appear that the output levels of all the goods and services in the economy have a tendency to move together. …” |