Macro and Micro Economics Essay

Microeconomics vs. Macroeconomics I. Introduction 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. II. Macroeconomics 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.

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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 economy as a whole. Examples of such include examining the nation’s Gross Domestic Product (GDP), unemployment and the Federal Reserve System. Based on these indicators along with the other variables, the general state of the economy can be determined and estimated.

Meanwhile, GDP is an economic tool whose numerical value defines the strength or weakness of the economy. In similar fashion, unemployment is another economic indicator of the strength of the economy as a whole. Other measurements of economic stability of a nation are determined through the volume of business transactions, commercial activities, and rate of money flows. The Federal Reserve System in the United States maintains all of these kinds of data and interprets and analyzes these information to help maintain and implement economic policies that will promote economic stability overall.

III. Microeconomics Microeconomics deals with people and businesses’ behavior and choices regarding the allocation of resources, goods and services. It explains how individual’s decisions are affected with the changes in prices and incomes. Microeconomics clarifies why business firms hire more people for increase production or why they have to relocate operation. Under a more simplified perspective, Microeconomics is different from Macroeconomics due to its range of focus. Microeconomics aims to focus on a more specific and smaller scale in terms of its approach.

For example, Microeconomics focuses on the small individual parts of the economy, such as individual business bases. Through this type of approach and the use of several economic tools including especially graphs, economics can help solve economic problems on the individual level. For example, it can examine a particular business and study how it can efficiently allocate its resources and how it can maximize its profits in the long-run using several economic inputs. Basically, Microeconomics guides decision-making and maximizing utility and how the individual can be most efficient.

IV. Both However, in terms of combining the two together and looking at them from an educational perspective, the two have more differences. Macroeconomics focuses more on the broader aspects like “GDP, inflation, unemployment, and other things you read about in the newspaper”(McCrane). In terms of difficulty as a course, Jim McCrane asserts that “[n]either course is particularly easy. They both have their share of lists to memorize, graphs to interpret and definitions” (McCrane).

However, in terms of what the student expects to gain from the course or what type of learner they are as an individual, then each can have different advantages or disadvantages for students. If students are more of a visual learner, then they will be compatible with Microeconomics. In terms of learning about the national economy and how to read business newspaper reports and interpret data, then macroeconomics will be a fit to them. Appendix[1] [pic] References/Bibliography: • What’s the difference between macroeconomics and microeconomics? Electronic Format. http://www. investopedia. om/ask/answers/110. asp [2009] • Microeconomics vs. Macroeconomics. Electronic Format. http://www. stchas. edu/faculty/gbowling/survey/MicroeconomicsVsMacroeconomics-Macro. html • Gottheil, Fred M. , and Wishart, David. (1997). Principles of Economics with Study Guide. Cincinnati: South-Western College Publishing. • “Macroeconomics/Microeconomics. ” Encyclopedia of Business and Finance. Ed. Allison McClintic Marion. Gale Cengage, 2001. eNotes. com. 2006. 20 Nov, 2009 • McCrane, Jim. “Macro vs. Microeconomics: How Do The Courses Compare? ” ———————– [1] Source->