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Macroeconomics vs Microeconomics Explained

Microeconomics focuses on individual decision-making and markets, studying demand, supply, pricing, and welfare. Macroeconomics analyzes whole economies, examining issues like GDP, unemployment, inflation, income distribution, and monetary policy. While microeconomics applies to internal business issues, macroeconomics applies more to external environmental factors and solves economy-wide problems. Both aim to understand economic behavior but at different levels of analysis.

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99 views17 pages

Macroeconomics vs Microeconomics Explained

Microeconomics focuses on individual decision-making and markets, studying demand, supply, pricing, and welfare. Macroeconomics analyzes whole economies, examining issues like GDP, unemployment, inflation, income distribution, and monetary policy. While microeconomics applies to internal business issues, macroeconomics applies more to external environmental factors and solves economy-wide problems. Both aim to understand economic behavior but at different levels of analysis.

Uploaded by

C Vandana
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

1 ) Difference between Macroeconomics and Microeconomics?

Microeconomics Macroeconomics

Meaning

Microeconomics is the branch of Economics that is Macroeconomics is the branch of Economics that deals with
related to the study of individual, household and firm’s the study of the behaviour and performance of the economy
behaviour in decision making and allocation of the in total. The most important factors studied in
resources. It comprises markets of goods and services macroeconomics involve gross domestic product (GDP),
and deals with economic issues. unemployment, inflation and growth rate etc.

Area of study

Microeconomics studies the particular market segment Macroeconomics studies the whole economy, that covers
of the economy several market segments

Deals with

Macroeconomics deals with various issues like national


Microeconomics deals with various issues like demand,
income, distribution, employment, general price level,
supply, factor pricing, product pricing, economic
money, and more.
welfare, production, consumption, and more.

Business Application

It is applied to internal issues. It is applied to environmental and external issues.

Scope

It covers several issues like demand, supply, factor


It covers several issues like distribution, national income,
pricing, product pricing, economic welfare, production,
employment, money, general price level, and more.
consumption, and more.

Significance

It is useful in regulating the prices of a product It perpetuates firmness in the broad price level, and solves
alongside the prices of factors of production (labour, the major issues of the economy like deflation, inflation,
land, entrepreneur, capital, and more) within the rising prices (reflation), unemployment, and poverty as a
economy. whole.

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Limitations

It has been scrutinised that the misconception of


It is based on impractical presuppositions, i.e., in
composition’ incorporates, which sometimes fails to
microeconomics, it is presumed that there is full
prove accurate because it is feasible that what is true for
employment in the community, which is not at all
aggregate (comprehensive) may not be true for
feasible.
individuals as well.

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What is Multiplier? What is investment multiplier? What is government
expenditure multiplier?
Ans:-
Multiplier;- The multiplier is a concept in economics that measures the
overall impact of a change in autonomous spending on the total output or
income of an economy. It represents the magnification effect of an initial
change in spending on the final level of economic activity.
Investment Multiplier:-

Government expenditure multiplier:-

The government expenditure multiplier refers to the effect of a change in


government spending on the equilibrium level of income. It measures
how an initial change in government expenditure leads to a subsequent
change in income, as the increased government spending influences
various sectors of the economy.

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