Correct Option
The correct option is 1 only
Explanation
Macroeconomics studies the economy as a whole, focusing on aggregate variables such as total output, general price levels, and aggregate employment. A fundamental characteristic of macroeconomics is the interdependence of these variables, often driven by aggregate demand and supply shocks that affect the entire economy simultaneously.
Statement-wise Analysis
- Statement 1 is Correct: In an economy, the output levels of various goods and services tend to move together. This co-movement is a key feature of the business cycle. During an economic expansion (boom), aggregate demand rises, stimulating production across most sectors. Conversely, during a recession, demand falls, leading to a contraction in output across the board.
- Statement 2 is Incorrect: Prices of different goods and services generally tend to move in the same direction, rather than opposite directions. During periods of inflation, the general price level rises, meaning the prices of most goods increase. While relative price changes occur due to specific supply-demand dynamics, the macroeconomic trend usually sees prices moving together in response to monetary or fiscal conditions.
- Statement 3 is Incorrect: Employment is a derived demand, dependent on the demand for goods and services. Since output levels across different production units tend to move together (as established in Statement 1), employment levels also tend to move in the same direction. During a boom, employment rises across various industries; during a recession, unemployment tends to increase across the economy.
Key Takeaway
Key Takeaway: Macroeconomic variables such as aggregate output, general price levels, and employment exhibit a strong tendency to move in unison (co-movement) in response to economy-wide fluctuations like booms and depressions.