OpenStax-CNX module: m63257 1 Microeconomics and Macroeconomics ∗ Alex Van der Merwe Based on Microeconomics and Macroeconomics† by OpenStax This work is produced by OpenStax-CNX and licensed under the Creative Commons Attribution License 4.0‡ Abstract By the end of this section, you will be able to: • Describe microeconomics • Describe macroeconomics • Contrast monetary policy and scal policy Economics is concerned with the well-being of all people, including those with jobs and those without jobs, as well as those with high incomes and those with low incomes. Economics acknowledges that production of useful goods and services can create problems of environmental destruction. It explores the question of how investing in education helps to develop workers' skills. It asks questions like how to tell when big businesses or big labor unions are operating in a way that benets society as a whole and when they are operating in a way that benets their owners or members at the expense of others. It looks at how government spending, taxes, and regulations aect decisions about production and consumption. It should be clear by now that economics covers a lot of ground. That ground can be divided into two parts: Microeconomics focuses on the actions of individual agents within the economy, like households, workers, and businesses; Macroeconomics looks at the economy as a whole. It focuses on broad issues such as growth of production, the number of unemployed people, the inationary increase in prices, government decits, and levels of exports and imports. Microeconomics and macroeconomics are not separate subjects. They just oer dierent economic points of view: one narrower, the other broader. To understand why both microeconomic and macroeconomic perspectives are useful, consider the problem of studying a biological ecosystem like a lake. One person who sets out to study the lake might focus on specic topics: certain kinds of algae or plant life; the characteristics of particular sh or snails; or the trees surrounding the lake. Another person might take an overall view and instead consider the entire ecosystem of the lake from top to bottom; what eats what, how the system stays in a rough balance, and what environmental stresses aect this balance. Both approaches are useful, and both examine the same lake, but the viewpoints are dierent. In a similar way, both microeconomics and macroeconomics study the same economy, but each has a dierent viewpoint. ∗ Version 1.1: Oct 22, 2016 7:46 am -0500 † http://cnx.org/content/m48592/1.5/ ‡ http://creativecommons.org/licenses/by/4.0/ http://cnx.org/content/m63257/1.1/ OpenStax-CNX module: m63257 2 ,height! ,height! Figure 1 Whether you are looking at lakes or economics, the micro and the macro insights should blend with In economics, the micro decisions of individual businesses are influenced by whether the macroecon 1 Microeconomics http://cnx.org/content/m63257/1.1/ OpenStax-CNX module: m63257 3 Microeconomics, from the perspective of consumers for example, is typically concerned with quest From the perspective of producers, microeconomics would be concerned with issues such as, for ex 2 Macroeconomics Macroeconomics is concerned with questions such as, for example, what determines the level of ec An economy's macroeconomic health can be defined by a number of goals: growth in the standard of 3 Key Concepts and Summary Microeconomics and macroeconomics are two different perspectives on the economy. The microeconom 4 Self-Check Questions Exercise 1 (Solution on p. ??-idp78918624.) What would be another example of a ``system'' in the real world that, like macro and mic http://cnx.org/content/m63257/1.1/ OpenStax-CNX module: m63257 5 Review Questions Exercise 2 What is the difference between microeconomics and macroeconomics? Exercise 3 What are examples of individual economic agents? Exercise 4 What are the three main goals of macroeconomics? http://cnx.org/content/m63257/1.1/ 4 OpenStax-CNX module: m63257 5 6 Critical Thinking Questions Exercise 5 A balanced national budget (tax revenues equal to government expenditure) and a balance Exercise 6 Macroeconomics is an aggregate (total) of what happens at the microeconomic level. Would http://cnx.org/content/m63257/1.1/ OpenStax-CNX module: m63257 6 Solutions to Exercises in this Module Solution to Exercise (p. ??-idp114519664) There are many physical systems that would work, for example, the study of planets (micro) i Glossary Definition 1: fiscal policy economic policies that involve government spending and taxes Definition 2: macroeconomics the branch of economics that focuses on broad issues such as growth, unemployment, inflation, and tr Definition 3: microeconomics the branch of economics that focuses on actions of particular agents within the economy, like househ Definition 4: monetary policy policy that involves altering the level of interest rates, the availability of credit in the economy http://cnx.org/content/m63257/1.1/ OpenStax-CNX module: m63257 http://cnx.org/content/m63257/1.1/ 7 OpenStax-CNX module: m63257 http://cnx.org/content/m63257/1.1/ 8
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