chakravyuha

From Basic of Economics by David E O’Connor.

Macroeconomics

Microeconomics is the branch of economics that focuses on the inter-
actions among the individual decision-making units within an economy

…

The most important partici-
pants in the microeconomy are households, business firms, and the government.
The private sector, or nongovernmental sector of the economy, consists of
households and firms. Households, for example, consume the lion’s share of all
goods and services produced in the U.S. economy. Hence, one important micro-
economic topic analyzes consumer demand, why people choose to buy certain
goods or services and not others. The behaviors and decisions of other house-
hold units including savers, investors, workers, and entrepreneurs are also criti-
cal elements in this study. Businesses, the other decision makers in the private
sector, supply goods and services in an economy. Economists who study the mi-
croeconomy are concerned with how firms make pricing, output, hiring, and
other production decisions. These business decisions are guided by the desire to
maximize profits in a market economy—another major topic in the field of mi-
croeconomics.

…

Macroeconomics

Macroeconomics is the branch of economics that deals with the eco-
nomic performance of the entire economy.

…

Macroeconomics focuses on economic growth and eco-
nomic stability in a nation. Economic growth is often measured by tracking a
nation’s real gross domestic product over time. The real gross domestic prod-
uct (GDP) is the dollar value of all newly produced goods and services in an
economy in a given year, adjusted for inflation. Economic stability refers to
maintaining stable price levels for consumer and producer goods, and a fully em-
ployed labor force. In short, macroeconomics is concerned with aggregates such
as national output, national income, national savings rates, and the national un-
employment rate, rather than with the behaviors of individuals or firms.

Fiscal and Monetary Policy [emphasis mine]

Government is also a major player in the realm of macroeconomics. This
is because the federal government devises policies that affect the economy as a
whole. The two most important government policies that influence a nation’s
economic performance are fiscal policy and monetary policy. Fiscal policy in-
volves changes in taxes and government spending, while monetary policy in-
volves changes in the money supply and cost of credit. For example, if the
government wants to jump-start a sluggish economy, it could lower taxes and in-
crease government spending. The government could also increase the money
supply and make credit easier to come by. Combined, these policies would in-
crease aggregate (total) demand in the economy and thus stimulate production,
create jobs, and encourage new investment. In the U.S. economy, Congress and
the president are mainly responsible for forming an effective fiscal policy for the
nation, while an independent Federal Reserve System (the Fed) devises the na-
tion’s monetary policy (see chapter 10 for more on monetary and fiscal policy).

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