Economics is the study that discusses how a society tries to solve the human problems of unlimited wants and scarce resources. This field of study is vast that it has been the subject of a great deal of writings. Economics is divided into Microeconomics and Macroeconomics. Macroeconomics deals with the overall economy, the aggregate demand and aggregate supply for all goods and services. The main concerns of Macroeconomics are the rate of inflation, unemployment and economic growth. On the other hand, Microeconomics deals with the functioning of individual consumers, business firms and households.
While it seems Microeconomics is totally the opposite of Macroeconomics, they are actually interdependent and complement one another. This paper will simplify the difference and the connection of the two studies.
The high unemployment rate during the Great Depression that began in 1929 and continued throughout the 1930s had been the driving force for the development of Macroeconomics. The simple economic models all failed to analyze and account for the severity of the economic situation at that time.
Government policy makers use macroeconomic models in analyzing current economic situation and determining how to attain policy goals in regards with economic growth, full employment and price stability. One macroeconomic model is the Keynesian model, which is based from John Maynard Keynes theory. He believed that some depressions were so severe that consumers demand needed to artificially stimulate through government fiscal policies such as public works programs and tax cuts. The Keynesian theory was written during the Great Depression.
Basically, the principles of Macroeconomics focus at examining the state of the economy through looking at it as a whole and the sum of its parts. Macroeconomics focuses on utilizing elements and tools to understand the...