OF COMMERCE (BCOM)
INTRODUCTION TO MACRO-ECONOMICS
QUESTION: MICRO-ECONOMICS AND MACRO-ECONOMICS
Economics is the foundation of all commercial activity and comprises two areas: microeconomics and macroeconomics. Macroeconomics is concerned with the big picture, for example, the national economy and gross domestic product. By contrast, microeconomics is concerned with the small picture and focuses on theories of supply and demand. Microeconomics is very important in business.
Macroeconomics: It means too large. When economic problems are analyzed on national or aggregate basis, it is known as macro approach. (From Greek prefix "makros-" meaning "large" + "economics") is a branch of economics dealing with the performance, structure, behavior, and decision-making of the whole economy. This includes national, regional, and global economies. With microeconomics, macroeconomics is one of the two most general fields in economics. Macroeconomists study aggregated indicators such as Gross Domestic Product, unemployment rates, and price indices to understand how the whole economy functions. Macroeconomists develop models that explain the relationship between such factors as national income, output, consumption, unemployment, inflation, savings, investment, international trade and international finance. In contrast, microeconomics is primarily focused on the actions of individual agents, such as firms and consumers, and how their behavior determines prices and quantities in specific markets. While macroeconomics is a broad field of study, there are two areas of research that are emblematic of the discipline: the attempt to understand the causes and consequences of short-run fluctuations in national income (the business cycle), and the attempt to understand the determinants of long-run economic growth (increases in national income). Macroeconomic models and their forecasts are used by both governments and large corporations to assist in the development and evaluation of economic policy and business strategy. [pic] Macroeconomics encompasses a variety of concepts and variables, but three are central topics for macroeconomic research. Macroeconomic theories usually relate the phenomena of output, unemployment, and inflation. Outside of macroeconomic theory, these topics are also extremely important to all economic agents including workers, consumers, and producers. Macroeconomics can be thought of as the “big picture” version of economics. Rather than analyzing individual markets, macroeconomics focuses on aggregate production and consumption in an economy. Some topics that macroeconomists study are: • The effects of general taxes such as income and sales taxes on output and prices • The causes of economic upswings and downturns
• The effects of monetary and fiscal policy on economic health • How interest rates are determined
• Why some economies grow faster than others
Microeconomics: micro means too small. When individual economic problems are analyzed, it is known as micro approach. (From Greek prefix) is a branch of economics that studies the behavior of individual households and firms in making decisions on the allocation of limited resources. Typically, it applies to markets where goods or services are bought and sold. Microeconomics examines how these decisions and behaviors affect the supply and demand for goods and services, which determines prices, and how prices, in turn, determine the quantity supplied and quantity demanded of goods and services. This is in contrast to macroeconomics, which involves the "sum total of economic activity, dealing with the issues of growth, inflation, and unemployment." Microeconomics also deals with the effects of national economic policies (such as changing taxation levels) on the aforementioned aspects of the economy. Particularly in the wake of the Lucas critique, much of modern macroeconomic theory...
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