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The two main subfields of economics are microeconomics and macroeconomics. Microeconomics is one of the two primary categories of economics, the other being macroeconomics. It studies individuals and business decisions, behavior, and the factors that influence them, along with supply and demand (Besanko et al., 2020). Specifically, microeconomics looks at:
- Individual markets—This examines specific markets where buyers and sellers exchange goods and services, such as housing, labor, and stock markets. It includes analyzing supply and demand curves in a market.
- Household behavior studies how households make choices regarding the consumption of goods and services under budget constraints.
- Factor markets consider markets for inputs in production like labor, capital, and land. How are wages, interest rates, and rents determined?
Macroeconomics, on the other hand, examines the behavior of the economy as a whole (Goodwin et al, 2022). It studies broad national and global issues such as:
- Aggregate output (GDP) and macroeconomic growth across many sectors.
- Unemployment rates – How do macroeconomic conditions and policies influence employment?
- Inflation – What general price level increases are occurring?
The difference between a positive statement and a normative statement is that a positive statement is an objective, factual statement that aims to describe what is or what could be based on empirical evidence and facts. It does not involve value judgments. An example of a positive statement is: “The unemployment rate in the US rose to 3.6% in November 2019.” On the other hand, a normative statement involves value judgments and subjective assessments of what should or ought to be, ideally as a matter of opinion, ethics, or morality. Normative statements are not empirically testable but reflect the speaker’s perspective. An example of a normative statement is: “Public colleges should offer free tuition to help increase access to higher education.”
Here are the reasons economists may offer conflicting advice to policymakers numbered as sentences:
- Differing perspectives based on their academic leanings between schools of thought, such as Keynesians, monetarists, and neoclassical economists, lead to theoretical models and analyses conflicting across schools.
- Reasonable people interpret the same complex economic data and factors differently due to uncertainty, meaning the data can support varied conclusions.
- Most economic policies involve costs, benefits, and unintended consequences that are difficult to predict, causing different economists to weigh these trade-offs differently based on their priorities.
References
Besanko, D., & Braeutigam, R. (2020). Microeconomics. John Wiley & Sons.
Goodwin, N., Harris, J. M., Nelson, J. A., Rajkarnikar, P. J., Roach, B., & Torres, M. (2022). Macroeconomics in context. Routledge.