Macroeconomics and Microeconomics

17 Apr

Macroeconomics examines either the economy as a whole or its basic subdivisions or aggregates such as the government, household, and business sectors. An aggre­gate is a collection of specific economic units treated as if they were one unit. There­fore, we might lump together the millions of consumers in the Moldavian economy and treat them as if they were one huge unit called “consumers.”
In using aggregates, macroeconomics seeks to obtain an overview, or general out­line, of the structure of the economy and the relationships of its major aggregates. Macroeconomics speaks of such economic measures as total output, total employ­ment, total income, aggregate expenditures, and the general level of prices in analyz­ing various economic problems. Very little attention is given to specific units making up the various aggregates. Macroeconomics examines the beach, not the sand, rocks, and shells.

Microeconomics looks at specific economic units. At this level of analysis, we observe the details of an economic unit, or very small segment of the economy, under the figurative microscope. In microeconomics we talk of an individual indus­try, firm, or household. We measure the price of a specific product, the number of workers employed by a single firm, the revenue or income of a particular firm or household, or the expenditures of a specific firm, government entity, or family. In microeconomics, we examine the sand, rocks, and shells, not the beach.
The macro-micro distinction does not mean that economics is so highly com­partmentalized that every topic can be readily labelled as either macro or micro; many topics and subdivisions of economics are rooted in both. Example: While the problem of unemployment is usually treated as a macroeconomic topic (because unemployment relates to aggregate spending), economists recognize that the deci­sions made by individual workers in searching for jobs and the way specific product
Important Economic terms:
MACRO­ECONOMICS:The part of econom­ics concerned with the economy as a whole.
AGGREGATE:A collection of specific economic units treated as if they were one unit.
MICRO­ECONOMICS:The part of econom­ics concerned with such individual units as industries, firms, and house­holds.
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One Response to “Macroeconomics and Microeconomics”

  1. Isabela July 13, 2012 at 2:56 PM #

    this blog is definitely an example of a huge help for me!

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