Q.(a) Discuss the scope of Macro Economics.

(a) The scope of macroeconomics includes the theories of income and employment, money and banking, the general price level, economic growth and international trade. (b) Arguments against planning: loss of freedom, bureaucracy and red tape, misallocation of resources, concentration of power, loss of private initiative, and calculation difficulties.

(a) Scope of Macro Economics

Macroeconomics studies the economy as a whole — aggregates such as total income, output, employment and the general price level. Its main areas (scope) are:

• Theory of Income and Employment: Studies what determines the level of national income, output and employment, and the causes of unemployment and trade cycles (Keynesian theory).
• Theory of Money and Banking: Studies the demand for and supply of money, the role of banks and the central bank, and monetary policy.
• Theory of the General Price Level: Studies the causes and effects of changes in the general price level — inflation and deflation — and how to control them.
• Theory of Economic Growth: Studies the long-run growth of national income and per-capita income and the problems of economic development.
• Theory of International Trade: Studies trade between countries, the balance of payments, exchange rates and international economic relations.

Thus the scope of macroeconomics is wide, dealing with the functioning and problems of the whole economy.

(b) Arguments against Planning

While economic planning has advantages, several arguments are advanced against it:

• Loss of economic freedom: Central planning restricts the freedom of consumers to choose and of producers to produce as they wish.
• Bureaucracy and red tape: Planning requires a large administrative machinery, leading to delays, red tape, corruption and inefficiency.
• Misallocation of resources: Central authorities may misjudge needs, leading to wrong allocation, shortages, surpluses and waste.
• Concentration of power: Planning concentrates enormous economic power in the hands of the State, which can be misused and may threaten democracy. …