Question

be original and use your own worlds

Classify the following topics as relating to microeconomics or macroeconomic:

a. a family’s decision about how much income to save

b. the effect of government regulations on auto emissions

c. the impact of higher national saving on economic growth

d. a firm’s decision about how many workers to hire

e. the relationship between the inflation rate and changes in the quantity of money

Answer 1

Answer a. a family’s decision about how much income to save-Microeconomics

Answer b. the effect of government regulations on auto emissions-Microeconomics

Answer c. the impact of higher national saving on economic growth-Macroeconomics

Answer d. a firm’s decision about how many workers to hire-Microeconomics

Answer e. the relationship between the inflation rate and changes in the quantity of money-Macroeconomics

Explanation-Microeconomics and Macroeconomics are two broad parts of Economics. The difference between these two are quite simple. Micro Economics is all about the actions of an individual unit at the micro level or grassroot level. It studies the behaviour of an individual unit such as, firm, household, market, industry, etc. On the other hand, the Macro Economics is all about the economy as a whole, i.e. it deals with the aggregate behaviour of individual units such as all firms, households, nation, industries, market, etc. in totality.

Here, a family's decision, auto emissions, a firm are all individual units or business and hence are micro economic issues. Whereas, national savings and inflation rate are aggregate variables of the whole economy and thus are under the coverage of Macro economics.

At first glance, micro economics and macro economics seems like completely opposite fields of economics. But, by observing minutely, one can tell that  reality, these two are inter-dependent remarkably similar to each other in many aspects , and the issues they study often overlap significantly. For example, Inflation is an aggregate phenomenon of the economy which falls under macro-economics. Inflation is caused by many factors like low interest rate, money supply etc. which leads to rise in prices of goods and services. The impact of rise in price in felt by individuals and businesses which are a part of micro economics.