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of economic models. It has made a valuable 2) Prof Carl Shapiro - “Macro economics
contribution to economics by developing deals with the functioning of the economy
various terms, concepts, terminologies, tools as a whole.”
of economic analysis etc. Economic models The following chart gives an idea about
are built using various economic variables. the scope of macro economics.

5) Business Decisions : Micro economic Scope of Macro Economics
theories are helpful to businessmen for
taking crucial business decisions. These Theory of Theory of Theory of Macro
Income and General Economic Theory of
decisions are related to the determination Employment Price Growth and Distribution
of cost of production, determination of Level and Development
Inflation
prices of goods, maximization of output
and profit, etc. Theory of Theory of
Consumption Investment
6) Useful to Government : It is useful to Function Function
government in framing economic policies Theory of
such as taxation policy, public expenditure Business Cycles
policy, price policy etc. These policies i) Theory of Income and Employment :
help the government to attain its goals Macro economic analysis explains which

of efficient allocation of resources and factors determine the level of national
promoting economic welfare of the society. income and employment and what causes
7) Basis of Welfare Economics : Micro fluctuations in the level of income, output and
economics explains how best results can employment. To understand, how the level of
be obtained through optimum utilization employment is determined, we have to study
of resources and its best allocation. It also the consumption function and investment

studies how taxes affect social welfare. function. Theory of Business Cycles is also a
part and parcel of the Theory of Income and
Meaning of Macro Economics :
Macro economics is the branch of Employment.

economics which analyses the entire economy. ii) Theory of General Price Level and
It deals with the total employment, national Inflation : Macro economic analysis shows
income, national output, total investment, total how the general price level is determined and
consumption, total savings, general price level further explains what causes fluctuations
interest rates, inflation, trade cycles, business in it. The study of general price level is
fluctuations etc. Thus, macro economics is the significant on account of the problems
study of aggregates. created by inflation and deflation.
iii) Theory of Growth and Development :
Definitions of Macro Economics :
Macro economics consists of the theory
1) J. L. Hansen - “Macro economics is that of economic growth and development. It
branch of economics which considers the explains the causes of underdevelopment
relationship between large aggregates such and poverty. It also suggests strategies for

as the volume of employment, total amount accelerating growth and development.
of savings, investment, national income iv) Macro Theory of Distribution : Macro
etc.”
theory of distribution deals with the relative
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