Question

Explain the scope of Macro economics.

Answer the following:

Explain the scope of macroeconomics.

Answer 1

Macroeconomics is the branch of economics that analyzes the entire economy. It deals with the total employment, national income, national output, total investment, total consumption, total savings, general price level, interest rates, trade cycles, business fluctuations, etc.

The scope of Macroeconomics is explained as follows:

1. Theory of Income and Employment: Macroeconomic analysis explains which factors determine the level of national income and employment and what causes fluctuations in income, output, and employment. To understand how the level of employment is determined, we have to study the consumption function and the investment function. The theory of Business Cycles is also part and parcel of the theory of income and employment.
2. Theory of General Price Level and Inflation: Macroeconomic analysis shows how the general price level is determined and explains what causes fluctuations. The study of the general price level is significant on account of the problems created by inflation and deflation.
3. Theory of Growth and Development: Macroeconomics 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.
4. Macro Theory of Distribution: The Macro theory of distribution deals with the relative shares of rent, wages, interest, and profit in the total national income.