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Introduction to Macroeconomics

National Income Accounting

Theories of National Income Determination

Inflation, Unemployment and Business Cycles

Macroeconomics Politics

Macroeconomics Issues: Nepalese Perspective

Meaning and Scope of Macroeconomics

Meaning of Macroeconomics
The term 'macro' is derived from the latin word 'Makros' which means large. Therefore, macroeconomics is concerned with the large or aggregate economic activity. Macroeconomics is the branch of economics which deals with the larger aspect of national economies such as inflation, unemployment, national growth and gross domestic product. It is concerned with the behavior of the whole economy (national level) rather than the behavior of individuals, individual firms or markets. This discipline of economics mainly focuses on how the different economic factors at the national level are operating and how the government policies are influencing those factors to achieve national growth. In other words, it is the study of the overall condition of an economy, total production, total consumption, total saving and total investment.

Macroeconomics is a vague discipline and no any single definition gives a clear idea on macroeconomics. Here are few definitions are given by economist which gives better knowledge on the meaning of macroeconomics:
P. A. Samuelson “Macroeconomics is the study of the behavior of the economy as a whole. It examines the overall level of nation’s output, employment, prices, and foreign trade. “
D.N. Dwivedi “Macroeconomics is essentially the study of behavior and performance of the economy as a whole. More importantly, it studies the relationship and interaction between the ‘factor of forces’ that determine the level and growth of national output and employment, general price level, and the balance of payments positions of an economy."

Prof. M. C. Connel "The level of macroeconomics is concerned either with the economy as a whole or with the basic sub-division or aggregates such as, governments, households, and business which made up the economy. In dealing with aggregates, macroeconomics is concerned with obtaining an overview or general outline of the structure of the economy and the relationship between the major aggregates, which constitute the economy. In short, macroeconomics examines the forest, not trees. It gives us a bird's eye view of the economy. "

Macroeconomics seeks to answer the following questions which help to develop a better understanding of the concept of macroeconomics:

  • What determines the level of economic activities, total national output, changes in price, causes of unemployment and overall economic growth?
  • What are the causes of fluctuation of nation’s economic activities?
  • How do government policies affect the functioning of the economy?
  • How is a balance of trade and balance of payment determined?
  • How should be the monetary and fiscal policy of the government to best suit its economy?

Scope of Macroeconomics
The scope of macroeconomics refers to the fields which the study subject matter covers. The scope of macroeconomics can be discussed as below:

  • Theory of National Income and employment
    The subject matter of macroeconomic analysis is to explain what determines the level of national income and employment, and what causes the fluctuations in the level of national income, output, and employment. Similarly, the consumption functions and investment functions which determine the level of income and employment are equally important in macroeconomic analysis.
  • Macro theory of distribution
    It studies the theory, which is related to national income or production in a different sector and classes, and how it should be distributed. More precisely, this theory covers the answer to these three questions: how is the national income is distributed among its citizen? What are the determinants of prices of a factor of production (land, labor, and capital)? and finally, how proportionally the national income is distributed among factor of productions?
  • Theory of General Price Level and inflation
    Macroeconomics is also concerned with how the general level of prices determined. Under this, it studies the determination of general price level, inflation, and its theories, money related theories.
  • Theory of Economic Growth
    Another more important branch of macroeconomics is the theory of economic growth. This theory applies to both the developed and under-developed economies. The special theories which explain the causes of under-development and poverty in under-developed countries are known as Economics of Development.
  • Theory of International Trade and Business Fluctuations
    It deals with nature, causes, impacts and implications of economic fluctuations in macroeconomic variables like employment, inflation, national income, economic growth, and output. Similarly, it also studies theories related to international trade, and other components like the balance of trade, the balance of payment, exchange rate, etc.
  • Fiscal Policy
    Fiscal policy is concerned with the revenue and expenditure of government. It refers to the budgetary policy of the government. The fiscal policy deals with the key components of macroeconomics like government expenditure, debt management, and tax revenue which finally helps the government to maintain economic stability, economic growth, high employment.
  • Monetary Policy
    Monetary policy is concerned with the exercise of the central bank to create good economic activities mainly through money and credit supply. It is an important tool for the government to design various types of economic policies. Monetary policy is concerned with various macroeconomic variables like quantity, quality, availability, and cost of money as well as the rate of interest, investment, employment, income etc.
  • Trade cycle
    It is the cyclical fluctuations in the national economy, which severely affects production, employment, price level and income. Macroeconomic variables help us in analyzing the causes of fluctuations in the economy and in suggesting the right remedies.


Abel, A. B., & Bernanke, B. S. (n.d.). Macroeconomics. Addison Wesley.
Dwivedi, D. N. (2010). Macroeconomic theory and policy. New Delhi: Tata McGraw-Hill Education.


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