Economic Policy and the Global Environment (ECON2001H)
Chiu Kim Wai Walter 11211521
Explain briefly how macroeconomics is different from microeconomics, How can macroeconomists use microeconomic theory to guide them in their work, and why might they wish to do so? Please give examples.
Microeconomics is the foundation of macroeconomics analysis, (Karl (E.Case , Ray C.Fair, Sharon M.Oster 2012) Stated that Macroeconomic is the totally sum of all the microeconomic decisions made by individual firms and households. That is the functioning of individual industries and behavior of individual decision-making. whereas the Macroeconomics is aggregate of difference individual decisions of the consumption of all households in the economy, some of totally output or total employment is reflect decisions from individual firms and households, we don’t know the former without the knowledge of the factors that influence. moreover, they are related in that general trends in either macro or micro will sometimes affect the other, but other times they can completely opposite trends. In the view of the two, a trend in one will be reflected in another, although sometimes on different scales.
Macroeconomics is the study of the economy as a whole. It takes a given the total output for the economy as a whole, Macroeconomiccs is focuses on the determinants of total national income and deal with aggregates, some of aggregate consumption and investment, it looks at the overall level of price instead of individual price.
(Edward Shapiro, Harcourt Brace Jovanovich, 1982) stated that "Strictly speaking, there is only one economics'. Macroeconomics theory has a foundation in microeconomics theory has a foundation in macro-economics theory". (GardnerAckley, Macroeconomics theory and policy, Macmillan, 1978 P.738) support this view when he says,"The relationship between...