Explain the scope of Macro economics.

Explain the scope of Macro economics.


Introduction: - Macroeconomics is the branch of economics which analyses the entire economy. It deals with the total employment, national income, national output, total investment, total consumption, total savings, general price level interest rates, inflation, trade cycles, business fluctuations etc. Thus, macroeconomics is the study of aggregates.

Definitions of Macro Economics :

1. J. L. Hansen - “Macroeconomics is that branch of economics which considers the relationship between large aggregates such as the volume of employment, total amount of savings, investment, national income etc.”

2. Prof Carl Shapiro - “Macroeconomics deals with the functioning of the economy as a whole.”

The following chart gives an idea about the scope of macro economics.



i) Theory of Income and Employment :
Macro economic analysis explains which factors determine 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 employment is determined, we have to study the consumption function and investment function. Theory of Business Cycles is also a part and parcel of the Theory of Income and Employment.

ii) Theory of General Price Level and Inflation : Macro economic analysis shows how the general price level is determined and further explains what causes fluctuations
in it. The study of general price level is significant on account of the problems
created by inflation and deflation.

iii) Theory of Growth and Development :
Macro economics consists of the theory of economic growth and development. It explains the causes of underdevelopment and poverty. It also suggests strategies for accelerating growth and development.

iv) Macro Theory of Distribution : Macro theory of distribution deals with the relative shares of rent, wages, interest and profit in the total national income.

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