2.1 Microeconomics and Macroeconomics

Question 1

Define Microeconomics

Answer 1

Microeconomics is the study of individual markets & sections of the economy, rather than the economy as a whole

Question 2

Define Macroeconomics

Answer 2

Macroeconomics is the study of economic behaviour & decision making in the entire economy, rather than just an individual market

Question 3

Describe the difference between microeconomics and macroeconomics.

Answer 3

Question 4

Explain two microeconomic choices a government may make with examples.

Answer 4

1. Decide which policies will be most effective in addressing market failures.
2. Which industries most require support.

Question 5

Explain two microeconomic choices a consumer may make.

Answer 5

1. Which goods or services do they value the most.
2. How much to save, spend or borrow.

Question 6

Explain two types of policy used to achieve macroeconomic aims.

Answer 6

1. Supply side policy, to improve the quality and quantity of the factors of production.
2. Monetary policy, adjusting the money supply and interest rates.

Question 7

Identify two choices that consumers make as a decision maker in the microeconomy.

Answer 7

1. Which good or services they value the most.
2. How to respond to changes in market conditions.

Question 8

What does microeconomics examine?

Answer 8

1. Choices of individuals, households & firms
2. Factors influencing their choices
3. How their decisions affect the price, demand & supply of goods/services
4. How Governments influence consumption & production

Question 9

What does macroeconomics examine?

Answer 9

1. The role of the government in achieving economic growth through fiscal, monetary & supply-side policies.
2. The role of the government in achieving price stability and low unemployment.
3. The interaction of the economy with the rest of the world through international trade.