Explain the subject matter of macro economics.

Explain the subject matter of macro economics.

Subject Matter of macro economics are as follows.

i)       Theory of Income and Employment
         Macro-economics analysis explains what determines the level of national income and employment, and what causes fluctuations in­ the level of income, output and employment. To understand how the level of income and employment is determined, we have to study the determinants of aggregate supply and aggregate demand and further we have to study consumption function and investment function. The analysis of consumption function and investment function are the important subjects to Macro-Economic Theory.

Theory of Business Cycles is also a part and parcel of the theory of income.
This theory also examines inter-relation between income and employment, and suggests policies to solve the problems related to these variables.

ii)      Theory of General Price Level and Inflation: Macro-Economics analysis shows how the general level of prices is determined and further explains what causes fluctuations in it.

The study of general level of prices is significant of account of the problems created by inflation and depression. The problems of inflation and depression are the serious economic problems faced these days by most of the countries in the world. Theory of price level studies causes and effects of inflation and depression, and suggests economic policies to tackle these problems.

iii)     Theory of Growth and Development: Another important subject matter of Macro-­Economics is the theory of economic growth and development. It studies the causes of under development and poverty in poor countries and suggests strategies for accelerating growth and development in them. Growth Theory also deals with the problems of full utilization of increasing productive capacity in developed countries and explains how the higher rate of growth with stability, can be achieved in these countries.

iv)     Macro Theory of Distribution:
Still another important subject matter of Macro-Economics is, to explain what determines the relative shares from the total national income of the various classes, especially a workers and capitalist. Ricardo and Karl Marx propounded theories, explaining the determination of relative shares of various social classes in the total national income. Afterwards, Kalecki and Kaldor also explained determination of relative shares of wages and profits in the national income.

Macro theory of distribution thus deals with the relative shares of rent, wages, interest and profits in the total national income.

In addition to this, study of public finance, international trade, monetary and fiscal policies are also a subject matter of Macro-Economics.

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