Question

Determine whether each of the following topics would more likely be studied in microeconomics or macroeconomics. Microeconomics Macroeconomics The effect of federal government spending on the national unemployment rate The effect of a cigarette tax on the quantity of cigarettes sold The effect of an increase in the money supply on the rate of inflation

Answer 1

The correct answers are the following:

Microeconomics

• The effect of a cigarette tax on the quantity of cigarettes sold

Macroeconomics

• The effect of federal government spending on the national unemployment rate
• The effect of an increase in the money supply on the rate of inflation

Microeconomics is defined as the study of the individual decisions reached by economic agents (households/individuals, firms and public sector entities) in the markets of products services and factors of production.

Macroeconomics is the study of the economy as a whole, using aggregate indicators that are the result of accummulating thousands or millions of the individual decisions studied in the micro approach, and which measure the behaviour of the whole economy of a certain country, region, or even the whole world (depending on the level of aggregation used!)