Question

Answer the following questions

What is the scope and subject matter of Macro-Economics?

Answer 1

In macroeconomics, we study how an economy operates as a whole. It focuses on the aggregate measures such as aggregate demand, aggregate supply, aggregate price level etc. It studies how these variables are determined and how they change over time. It helps us in understanding various economic relationships and economic problems at the economy or aggregate level. It is also known as the ‘Theory of Income and Employment’ as its main focus is on how income and employment levels are determined. In macroeconomics, we confront major problems such as poverty, unemployment, inflation, BOP disequilibrium etc.
The following are the important macroeconomic theories.
i. Theory of national income: Macroeconomics helps in the national income analysis. It provides various methods to calculate the national income.

ii. Theory of employment: Macroeconomics also helps in determining the level of employment and unemployment in an economy.

iii. Theory of Money: Macroeconomics studies the functions and theories of money. It is useful in analysing the effect of a change in demand and supply of money on the employment levels.

iv. Theory of general price level: Macroeconomics studies how the general level prices in an economy are determined and the effects of fluctuations on them.

v. Theory of international trade: It helps in understanding trade between two different countries, the rules and regulations followed, policies etc.

vi. Theory of economic growth: Macroeconomics emphasises on how to increase the per capita income or national income. It aims at accelerating the economic growth.