What Are the Issues That We Study in Macroeconomics? How Is Macroeconomics Different from Microeconomics?

Question 1

What are the issues that we study in macroeconomics? How is macroeconomics different from microeconomics?

Macroeconomics looks at issues like why some economics grow more rapidly than other and who economies can experience severe slumps. Moreover key macroeconomics issues include like the search for the factors that cause economics to grow, productivity to improve and living standard to raise over long period of time.

• Economic growth and living standards.

It refers to the total amount of goods and services produced by individual of the good and services over a period of time.  Every country aims to have sustained economic growth, a process of steady increase in the quantity and quality of the goods and services the economy can produce. Standard of living is the degree to which people have access to goods and services that makes their lives easier, healthier, safer and more enjoyable.

• Unemployment

The unemployment rate, the fraction of the labor force who are looking for a job but can’t find work is a key indicator of the state of the labor market. When the unemployment rate is high, work is hard to find and people who do have jobs typically find it harder to get promotions or wage increases. Unemployment rises during recession and there is dramatic spike in unemployment during the great depression.

• Inflation

It refers to rate at which prices in general are increasing overtime. When the inflation rate changes sharply, it can alter the distribution of income between borrower and savers. Very high inflation imposes cost on the economy as do negative inflation (deflation). Inflation and unemployment are often linked together on policy discussions. Is because that unemployment can be reduced only at the cost of higher inflation and that inflation can be reduced only at the cost of higher unemployment.

             Difference between Macroeconomics and Microeconomics

Question 2;

Why the GDP is considered an important and versatile indicator of economic growth of a country? There are also certain limitations of using GDP as an index of welfare of a country. What are these?

GDP is considered as an important tools to measures the economic growth because;

• It takes in the consideration of final goods to measure the country’s annual domestic product. It avoids intermediate goods while calculating the national income of a country. The multiple counting of final goods are also avoided while calculating the GDP.

• It is the correct tools to measure the economic growth of a country as is intended to measure how much an economy produces in a given period, such as a quarter or a year. Higher GDP indicates economy is stable and vice versa.

• GDP helps the policy makers and central banks to make plans and decisions through the judge whether economy is expanding or contracting, whether it required a boost or restraint.

The limitation of using GDP as an index of welfare of a country are as follows;

• GDP dose not registered any measure of welfare.

As GDP only measures the final goods and services produced per person over a certain period of time, it lacks the tools to measure the degree of welfare of individual. There are many ways to measure to measure GDP, but neither of those tools are indicator of welfare.