Question

the major differences between macroeconomics and microeconomics.

Explain which of the two that you feel has most significantly broadened your understanding of the American economy overall, and which you feel has the most relevance to your individual goals. Refer to two or three the theories, concepts, terms, or models we have studied that you can apply in your daily life.

Answer 1

differences between macroeconomics and microeconomics.

Macroeconomics:

• For most macroeconomists, the purpose of this discipline is to maximize national income and provide national economic growth.
• The most common macroeconomic topics of study for national entities are sustainability, full employment, price stability, external balance, equitable distribution of income and wealth, and increasing productivity.
• Macroeconomists hope that their models help address two key areas of research: the causes and consequences of short-run fluctuations in national income (otherwise known as the business cycle) and what determines long-run economic growth.
• deflation: A decrease in the general price level, that is, in the nominal cost of goods and services.
• Macroeconomics: The study of the performance, structure, behavior, and decision-making of an economy as a whole, rather than individual markets.
• inflation: An increase in the general level of prices or in the cost of living.

Microeconomics:

• One of the major goals of microeconomics is to analyze the market and determine the price for goods and services that best allocates limited resources among the different alternative uses.
• Microeconomics assumes businesses are rational and produce goods that maximize their profit.
• The science of microeconomics covers a variety of specialized areas of study including: industrial organization, labor economics, financial economics, public economics, political economy, health economics, urban economics, law and economics, and economic history.

• microeconomics: That field that deals with the small-scale activities such as that of the individual or company.
• Scarcity: an inadequate amount of something; a shortage

• Microeconomics and macroeconomics both focus on the allocation of scarce resources. Both disciplines study how the demand for certain resources interacts with the ability to supply that good to determine how to best distribute and allocate that resource among many consumers.
• Microeconomics studies the behavior of individual households and firms in making decisions on the allocation of limited resources. Another way to phrase this is to say that microeconomics is the study of markets.
• Macroeconomics is generally focused on countrywide or global economics. It studies involves the sum total of economic activity, dealing with the issues such as growth, inflation, and unemployment.
• There are some economic events that are of great interest to both microeconomists and macroeconomists, but they will differ in how and why they analyze the events.

• inflation: An increase in the general level of prices or in the cost of living.
• microeconomics: The study of the behavior of individual households and firms in making decisions on the allocation of limited resources.
• Macroeconomics: The study of the performance, structure, behavior, and decision-making of an economy as a whole, rather than individual markets.

Microeconomics is the study of decisions made by people and businesses regarding the allocation of resources and prices of goods and services. It also takes into account taxes, regulations, and government legislation.

Microeconomics focuses on supply and demand and other forces that determine the price levels in the economy. It takes what is referred to as a bottom-up approach to analyzing the economy. In other words, microeconomics tries to understand human choices, decisions, and the allocation of resources.

Having said that, microeconomics does not try to answer or explain what forces should take place in a market. Rather, it tries to explain what happens when there are changes in certain conditions.

For example, microeconomics examines how a company could maximize its production and capacity so that it could lower prices and better compete in its industry. A lot of microeconomic information can be gleaned from the financial statements.

Microeconomics involves several key principles including (but not limited to):

• Demand, Supply, and Equilibrium: Prices are determined by the theory of supply and demand. Under this theory, suppliers offer the same price demanded by consumers in a perfectly competitive market. This creates economic equilibrium.
• Production Theory: This principle is the study of how goods and services are created or manufactured.
• Costs of Production: According to this theory, the price of goods or services is determined by the cost of the resources used during production.
• Labor Economics: This principle looks at workers and employers, and tries to understand the pattern of wages, employment, and income.

Macroeconomics, on the other hand, studies the behavior of a country and how its policies affect the economy as a whole. It analyzes entire industries and economies, rather than individuals or specific companies, which is why it's a top-down approach. It tries to answer questions like "What should the rate of inflation be?" or "What stimulates economic growth?"

Macroeconomics examines economy-wide phenomena such as gross domestic product (GDP) and how it is affected by changes in unemployment, national income, rate of growth, and price levels.

Macroeconomics analyzes how an increase or decrease in net exports affects a nation's capital account, or how GDP would be affected by the unemployment rate.

Macroeconomics focuses on aggregates and econometric correlations, which is why it is used by governments and their agencies to construct economic and fiscal policy. Investors of mutual funds or interest-rate-sensitive securities should keep an eye on monetary and fiscal policy. Outside of a few meaningful and measurable impacts, macroeconomics doesn't offer much for specific investments.

John Maynard Keynes is often credited as the founder of macroeconomics, as he initiated the use of monetary aggregates to study broad phenomena. Some economists dispute his theory, while many of those who use it disagree on how to interpret it.