The word ‘scope’ refers to the range or area covered by anything or any subject or by any topic. Thus, considering this point the term scope of macroeconomics means the topics or issues that are covered by macroeconomics. Macroeconomics has got birth after the publication of J.M. Keynes General Theory of Employment, Interest, and Money in 1936. This work of Keynes includes both factors determining the level of aggregate variables like national income, gross domestic product, total employment/unemployment, the general level of prices, and how such variables change over time.
Therefore, the scope, issues, or areas covered by macroeconomics (scope of macroeconomics) can be explained with the help of the following points.
Theory of National Income
The major issue in the study of macroeconomics is to explain various concepts of national income, different elements and components, methods of measuring national income, and difficulties in the measurement of national income. It also deals with different social accounts (social account refers to the systematic record and presentation of national income data).
Theory of Employment
Explaining the factors determining the level of employment in an economy and, causes of involuntary unemployment is also the major issue of macroeconomic study. Therefore, macroeconomics studies cause consequences and types of unemployment. The level of unemployment/employment is determined by factors like effective demand, aggregate demand, aggregate supply, aggregate consumption, aggregate investment, and so on.
Theory of Money
There is a greater effect of change in demand for money and supply of money on the level of income, employment, output, and price in an economy. Thus, the theory of money is an important part of the macroeconomic study. Study about banks and financial institutions (BFIs) is also part of this study.
Theory of General Price Level and Inflation
The study of factors affecting the general level of price in an economy is also an important subject-matter of macroeconomics. Macroeconomics thus studies the determination of the general price level/inflation, causes and consequences of inflation, and the problem of inflation which is being faced by developed as well as developing countries.
Theory of Economic Growth
The study of macroeconomic also includes different theories of economic growth which explain the determination of growth of nations’ real output. The growth theories explain the causes of unemployment, poverty in less developed countries and suggest strategies for initiation and accelerating economic growth. Different policies like monetary policy and fiscal policies are also studied under it as these policies have a direct impact on the economic growth of the nation.
Theory of Consumption and Investment
Aggregate demand includes household aggregate consumption and the private sector’s aggregate investment in the two-sector economy. Fluctuations in these two components impact the level of output and employment in the economy. Therefore, the study of determinants of aggregate consumption of household and aggregate investment of business sector is one of the important issues in macroeconomics.
Theory of International Trade
Macroeconomics studies issues related to international trade. So, export, import, exchange rate, the balance of trade, the balance of payment, etc. are the major topics in this area for a modern economy.
Macro Theories of Distribution
Theories of distribution in macroeconomics are related to the share of national income accruing to labor in the form of wages and capitalists or entrepreneurs in the form of business profit. Macro theories of income distribution forwarded by David Ricardo, Michel Kalecki, and Nicholas Kaldor are the main theories of macroeconomic distribution.
Theories of Fluctuations
The increase and drop in the total level of income and output, total demand, total employment/unemployment, general price level, total investment, etc. have always been the key interests of every economy, especially those are based on the working of the market mechanism. The overall fluctuations of macroeconomic activities are named as trade or business cycle. Many theories are involved to explain the causes of different phases of the business cycle.
Macroeconomics is the study of the whole economy in terms of the total amount of goods and services produced, total income earned, total consumption, an investment made and stock of capital, the level of employment of productive resources, the general behavior of prices, and quantity of money in circulation, revenues and expenditure of government, export and import of the country and so on. Therefore, it attempts to deal with aggregate issues of recession and prosperity, growth or stagflation, and price level stability. Macroeconomics in terms of scope (scope of macroeconomics) is both science and art, both positive and normative science.