Nature of Macro Economics

Macro economics is the study of aggregates or averages covering the entire economy, such as, total employment, national income, national output, total investment, total consumption, total savings, aggregate supply, aggregate demand, and general price-level, wage level and cost structure. 

In other words, it is aggregate economics which examines the interrelations among the various aggregates, their determination and causes of fluctuations in them. Thus in the words of Prof. Ackley, "Macroeconomics 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 entire economy. It studies the character of the forest independently of the trees which compose it". 

Macro economics is also known as the theory of incomes and employment, or simply income analysis. It is concerned with the problems of unemployment, economic fluctuations, inflation or deflation. International trade and economic growth. It is the study of the causes of unemployment, and the various determinants of employment.

In the field of business cycles it concerns itself with the effect of investment on total output, total income, and aggregate employment. In the monetary sphere it studies the effect of the total quantity of money on the general price-level. In international trade, the problems of balance of payments and foreign aid fall within the purview of macroeconomics analysis. 

Above all, macroeconomics theory discusses the problems of determination of the total income of a country and causes of its fluctuations. Finally it studies the factors that retard growth and those which bring the economy on the path of economic development.


Notes provided by Prof. Sujatha Devi B (St. Philomina's College)