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Micro economics can be defined as the study of how household and firm make decisions and how they are interact in specific markets.
Macro economics is the study of economy wide phenomena; It deals with the factors which determine national output & employment, the general price level, total spending and saving in the economy, total imports & exports and the demand for and the supply of money and other financial assets.
It is the extension of time perspective and it is based on the principle that as future is full of risk and uncertain, the return in future is less attractive than the same return today.
The future there fore must be discounted both for the elements of delay, risk and uncertainty.
The concept of discounting future is based on the fundamental fact that, a rupee earned now is worth more than the a rupee earned a year after, even if there will be a certain future return, yet it must be discounted because to wait for future implies a sacrifice for the present.
Let a sum of Rs 100 is due after 1 year; rate of interest is 10%; Then we can determine the sum to be invested so as to produce the return ® of Rs 100 at the end of 1 year.
The present value or the discounted value of Rs 100 will be,