A contemporary example of macroeconomics occurs when the Federal Reserve buys treasury-packed securities with a bid to boost the money supply and reduce interest rates. This is done to enhance aggregate demand, which brings down unemployment rates. The Congress may also raise taxes and cut down expenses to reduce aggregate demand (Johnson, 2017). On the other hand, a contemporary example of microeconomics occurs when the people and industry of a nation need cellphones, raw materials, cars, and clothes, etc., but there are limited resources. Therefore, the problem of unlimited needs with finite resources can only be addressed by considering some decisions. For instance, the nation may choose to lessen the making of clothes to boost food production through major investments.
Macroeconomics is essential particularly at this time when the world’s economy in which corporations create global presences and nations finance one another as they share profits. Macroeconomics helps to determine the true picture of a nation’s economic state. Through macroeconomics, the functioning of the economy can be described. This is critical as the level of national income and employment can be established on the grounds of demand and supply dynamics (Acemoglu, Ozdaglar, & Tahbaz-Salehi, 2017). Macroeconomics helps to attain the goals of economic growth. It examines the drivers of economic growth of a nation to attain a higher GDP level and employment.
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Microeconomics is instrumental in understanding consumer behavior. The economy constitutes the aspect of goods and services being sold to consumers. Microeconomics guides the proper allocation of funds for the maximum utilization of these resources (Acemoglu, Ozdaglar, & Tahbaz-Salehi, 2017). The economy is also about firms and entrepreneurs, who are interested in understanding costs, market, and consumer behavior and come up with appropriate economic decisions. Microeconomics cannot be underrated, as it is foundational to understanding macroeconomics, monetary economics, labor, international trade, and among others. Therefore, the relationship between various variables of economics can be determined.
References
Acemoglu, D., Ozdaglar, A., & Tahbaz-Salehi, A. (2017). Microeconomic origins of macroeconomic tail risks. American Economic Review , 107 (1), 54-108.
Johnson, H. G. (2017). Macroeconomics and monetary theory . Routledge.
