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three main goals of macroeconomics

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.

Self-Check Questions

What would be another example of a “system” in the real world that could serve as a metaphor for micro and macroeconomics?

Review Questions

  1. What is the difference between microeconomics and macroeconomics?
  2. What are examples of individual economic agents?
  3. What are the three main goals of macroeconomics?

Critical Thinking Questions

  1. 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?
  2. 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.

Glossary

fiscal policyeconomic policies that involve government spending and taxesmacroeconomicsthe branch of economics that focuses on broad issues such as growth, unemployment, inflation, and trade balance.microeconomicsthe branch of economics that focuses on actions of particular agents within the economy, like households, workers, and business firmsmonetary policypolicy that involves altering the level of interest rates, the availability of credit in the economy, and the extent of borrowing

Solutions

Answers to Self-Check Questions

There are many physical systems that would work, for example, the study of planets (micro) in the solar system (macro), or solar systems (micro) in the galaxy (macro).