Question

Consider the statements. Indicate whether each statement falls mainly under the field of microeconomics or macroeconomics.
1. A tax on tires increases the price of tires Microeconomics Macroeconomics
paid by car owners.
2. As a result of a severe recession, the total
output gross domestic product of a nation falls
by 4%.
3. Increased consumer spending causes the
national unemployment rate to fall.
4. Increased consumer spending causes the rate
of rate of inflation to rise
5. Optimism about future car sales leads General
Motors to hire more auto workers.
6. Robotic technology reduces the demand for auto
workers.

Answer 1

Answer:

1. Microeconomics

2. Macroeconomics

3. Macroeconomics

4. Macroeconomics

5. Microeconomics

6. Microeconomics

Explanation:

Macroeconomics can be described as the study of the behavior of an overall economy. Macroeconomics studies issues that are related to the whole economy such as changes in unemployment, economic growth rate, national income, inflation, price levels, and gross domestic product (GDP).

On the other hand, Microeconomics can be described as the behavior of economic agents such as individuals and firms as regards their decision making relating the scarce resources allocation and the interactions among the economic agents.

Based on the above explanation, we can have the following categorizations:

1. A tax on tires increases the price of tires paid by car owners. This is Microeconomics because it concerns the behavior of individuals, i.e., car owners.

2. As a result of a severe recession, the total output gross domestic product of a nation falls by 4%.. This Macroeconomics because it concerns the gross domestic product which total values of goods produced in an economy.

3. Increased consumer spending causes the national unemployment rate to fall. This is Macroeconomics because it relates the national unemployment.

4. Increased consumer spending causes the rate of rate of inflation to rise. This is Macroeconomics because it relates an increase in inflation rate.

5. Optimism about future car sales leads General Motors to hire more auto workers. This is Microeconomics because it relates to the decision and action of a firm, i.e. General Motors.

6. Robotic technology reduces the demand for auto workers.This is Microeconomics because it relates to the decision and action of individuals, i.e. auto workers.

Answer 2

Based on the definitions of microeconomics and macroeconomics, the statements below fall under:

Macroeconomics:

• 2. As a result of a severe recession, the total  output gross domestic product of a nation falls by 4%.
• 3. Increased consumer spending causes the  national unemployment rate to fall.
• 4. Increased consumer spending causes the rate of inflation to rise

Microeconomics:

• 1. A tax on tires increases the price of tires  paid by car owners.

• 5. Optimism about future car sales leads General  Motors to hire more auto workers.

• 6. Robotic technology reduces the demand for auto  workers.

Macroeconomics relates to issues that affects the economy as a whole as opposed to a single industry or firm. A decrease in GDP, issues regarding national unemployment and inflation rising are therefore macroeconomic as they affect the entire economy.

Microeconomics on the other hand, relates to issues affecting an industry or only a single entity. This is why the other entries are microeconomics as they relate to a single industry.

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