Macro economics is a study of the economy as a whole, and the variables that control the macro- economy.

The study of government policy meant to control and stabilize the economy over time, that is, to reduce fluctuations in the economy is known as macro economics.

Macroeconomics also includes the study of monetary policy, fiscal policy, and supply-side economics.

The term Macro is derived from the Greek word “MAKROS” which means large. It deals with the aggregates such as national income, output, employment and the general price level etc, therefore it is called the Aggregative Economics.

According to Shapiro, “Macroeconomics deals with the functioning of the economy as a whole”. According to Boulding, “Macroeconomics deals not with individual quantities as such, but with aggregates of these quantities, not with individual income but with national income, not with individual output but with national output”.

Prof. Ackley defines Macro Economics as “Macro Economics deals with economic affairs ‘in the large, it concerns the overall dimensions of economic life. It looks at the total size and shape and functioning of the elephant of economic experience, rather than working of articulation or dimensions of the individual parts. It studies the character of the forest, independently of the tress which compose it.”

Why macroeconomics and not only microeconomics?

The whole is more complex than the sum of independent parts. It is not possible to describe an economy by forming models for all firms and persons and all their cross-effects. Macroeconomics investigates aggregate behavior by imposing simplifying assumptions (“assume there are many identical firms that produce the same good”) but without abstracting from the essential features.

These assumptions are used in order to build macroeconomic models. Typically, such models have three aspects: the ‘story’, the mathematical model, and a graphical representation.

Scope of Macroeconomics

The scope of macro economics has been explained as under:-

  1. Theory of National Income:-Macro economics studies the concept of national income, its different elements, methods of its measurement and social accounting.
  2. Theory of Employment:-It studies the problems of employment and unemployment. There are different factors which determine employment. They are like effective demand, aggregate demand, aggregate supply, total consumption, total savings and total investment etc.
  3. Marco Theory of distribution:-There are macro economic theories of These theories try to explain how the national output is distributed among the factors of production.
  4. Economic development:-.Economic development is a long run process. In it, we analyze the problems and theories of development.
  5. Theory of International Trade:-It also studies principles determining trade among different Tariff's protection and free-trade polices fall under foreign trade.
  6. Theory of Money: - Changes in demand and supply of money effect level of Therefore, under macro economics functions of money and theories relating to money are studied.
  7. Theory of Business Fluctuations:-It also deals with the fluctuations in the level of employment, total expenditure, and general price level.
  8. Theory of General Price Level:-A continuous rise in the price level is called inflation. It distorts production. It increases inequalities in the distribution of income and wealth. The common man is injured by inflation. Deflation is the opposite of inflation. The general price level falls continuously. Output and employment levels fall. Macro economics provides explanation provides explanation for the occurrence of inflation and deflation.