Concept of Macroeconomics | Nature of Macroeconomics

Concept of Macroeconomics

Concept of Macroeconomics

Meaning of Macroeconomics:

Macroeconomics is the branch of economics that 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 Macroeconomics

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.”

Scope of Macroeconomics

Nature of Macroeconomics

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(a) Theory of Income and Employment:

The macroeconomic 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.

(b) Theory of General Price Level and Inflation:

Macroeconomic 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.

(c) Macro Theory of Distribution:

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.

(d) Theory of Growth and Development:

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

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