The correct option is 1 and 3 only.
Explanation
Macroeconomics is the branch of economics that studies the behavior and performance of an economy as a whole. It focuses on aggregate changes in the economy such as unemployment, growth rate, gross domestic product, and inflation, distinguishing it from microeconomics, which studies individual agents and markets.
Statement-wise Analysis
- Statement 1 is Correct: Macroeconomics specifically addresses situations facing the economy as a whole. It deals with aggregate variables like total output, total employment, and the general price level, rather than individual markets or firms.
- Statement 2 is Incorrect: Taxation and budgetary policies constitute Fiscal Policy, which is a primary tool of macroeconomics. The government uses these tools to influence aggregate demand, resource allocation, and income distribution. Therefore, the study of these policies is central to macroeconomics.
- Statement 3 is Correct: Modern macroeconomics acknowledges that aggregate economic trends result from the decisions of individual households and firms. Consequently, it accounts for microeconomic foundations, meaning that macroeconomic theories regarding aggregate demand and supply are often derived from the optimization behavior of individual agents (microeconomics).
Key Takeaway
Macroeconomics analyzes the economy at an aggregate level (GDP, inflation, unemployment) and includes the study of government policies (fiscal and monetary), while increasingly relying on microeconomic foundations to explain aggregate behavior.