Macroeconomics and Microeconomics Explained

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Macroeconomics and microeconomics explained
Macroeconomics and microeconomics forms the two major important studies within the branch of economics that are both essential in sustaining the overall growth and standard of the economy. They are interdependent and work in liaison with one another. However they differ in a number of ways both in terms of their scope and implementation. Whereas microeconomics tends to focus on smaller business sectors, macroeconomics focuses on the larger income of a country. Macroeconomics is defined as the study of the behaviors and activities of the economy as a whole. It encompasses the study of unemployment, gross domestic products, price indices, national output, consumption, savings, inflation, international trade, investment as well as international finances. Thus macroeconomics in general terms focuses on economic growth and changes in the national income. On the other hand microeconomics mainly focuses on the market’s forces of supply and demand which determine the economy’s price levels. It looks at the behaviors and activities of economic units such as individual households and firms, which make up the whole economy (Jain & Ohri 2003) The main distinguishing feature between Microeconomics and Macro economics is based on their levels of operation. Whereas microeconomics operates on an individual level that tries to establish the demand and supply of individual goods and services as well as with consumer behavior in terms of budget line and constraints, macroeconomics entails studying the consumer demand and supply to determine the price level, inflation and unemployment levels among other factors. Macroeconomics mainly employs two strategies which can only be undertaken by the central government through the central bank, these are monetary policy and fiscal policy. Fiscal policy includes the governments’ use of taxation and government spending to influence the general direction of a nation’s economy. In terms of the...
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