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In broad terms the difference between microeconomics and macroeconomics is that: A
In broad terms the difference between microeconomics and macroeconomics is that:
A. microeconomics studies the effects of government taxes on the national unemployment rate.
B. macroeconomics studies the effects of government regulation and taxes on the price of individual goods and services whereas microeconomics does not.
C. they use different sets of tools and ideas.
D. microeconomics studies decisions of individual people and firms and macroeconomics studies the entire national economy.
Expert Solution
The correct answer is D).
This is quite a simple distinction that economists make from the very beginning. Indeed, in any introductory book of economics we will find this classification, which was found to be really useful in order to facilitate the study of such a broad science.
Thus, we need to keep in mind that microeconomics is focused on the study of partial equilibrium (single markets), on the decision making process by economic agents at individual level, on deriving supply and demand curves from individual behavior, etc. Instead, macroeconomics in focused on the study of general equilibrium, aggregate markets and general economic phenomena, such as inflation, short-term growth, etc. Basically, macroeconomics is focused on studying economic phenomena at national level.
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