A) A recent news report stated that the unemployment rate in the country Lithasia had increased from 10.2% to 18.2% from 2003 to 2013 and that the government had adopted strict fiscal measures to expand employment

Question

Would this report be considered microeconomic or macroeconomic analysis? b) Students in a class are discussing how a firm should determine its profit-maximizing output. Would this discussion be considered microeconomic or macroeconomic analysis?

Answer 1

a) This report will pertain to macroeconomics. Macroeconomics refers to the study of an economy as a whole. Macroeconomics covers economy-wide phenomena, like the growth rate of a country's total economic output, the inflation rate, or the unemployment rate. The report suggests that the total unemployment rate in Lithasia has increased from 10.2% to 18.2% from 2003 to 2013. This estimation is a measure of the economy-wide aggregate unemployment, and is covered under macroeconomics.

b) Microeconomics is the study of how individuals, households, firms, and governments make choices. The students are discussing how a firm should determine its profit-maximizing output. This is a discussion of an individual entity and so is considered microeconomic analysis.