Key Concepts and Summary
Key Concepts and Summary
Microeconomics and macroeconomics are two different perspectives on the economy. The microeconomic perspective focuses on parts of the economy: individuals, firms, and industries. The macroeconomic perspective looks at the economy as a whole, focusing on goals like growth in the standard of living, unemployment, and inflation. Macroeconomics has two types of policies for pursuing these goals: monetary policy and fiscal policy.
Glossary
fiscal policy
economic policies that involve government spending and taxes
macroeconomics
the branch of economics that focuses on broad issues such as growth, unemployment, inflation, and trade balance.
microeconomics
the branch of economics that focuses on actions of particular agents within the economy, like households, workers, and business firms
monetary policy
policy that involves altering the level of interest rates, the availability of credit in the economy, and the extent of borrowing
Critical Thinking Questions
- A balanced federal budget and a balance of trade are considered secondary goals of macroeconomics, while growth in the standard of living (for example) is considered a primary goal. Why do you think that is so?
- Macroeconomics is an aggregate of what happens at the microeconomic level. Would it be possible for what happens at the macro level to differ from how economic agents would react to some stimulus at the micro level? Hint: Think about the behavior of crowds.
This lesson is part of:
Introduction to Economics