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

(a) Macro economics deals with aggregates — income and employment, prices, money, growth and trade. (b) Economic development is determined by capital formation, natural and human resources, technology and infrastructure.

(a) Scope of Macro Economics

Macro economics studies the economy as a whole rather than individual units. Its scope covers:

• Theory of income and employment: determination of national income, output and the level of employment (Keynesian theory, consumption and investment functions, the multiplier).
• Theory of general price level (money): study of inflation and deflation, the value of money, and the quantity theory of money.
• Theory of money and banking: the role of money, commercial banks, the central bank and monetary policy.
• Theory of economic growth (development economics): long-run growth of national income and per-capita income, and planning.
• Theory of international trade: balance of payments, exchange rates and foreign trade at the aggregate level.
• Macroeconomic policy: fiscal and monetary policy to achieve full employment, price stability and growth.

(b) Economic determinants of economic development

The main economic factors that determine a country's economic development are:

• Capital formation: a high rate of saving and investment builds productive capital and raises output.
• Natural resources: availability and efficient use of land, minerals, water and forests.
• Human resources: the size, skill, education, health and productivity of the labour force. …