College

Determine whether each of the following topics would more likely be studied in microeconomics or macroeconomics.

1. The effect of a large government budget deficit on the economy's price level
a. microeconomics
b. macroeconomics

2. The effect of an increase in the money supply on the rate of inflation
a. microeconomics
b. macroeconomics

3. The effect of government regulation on a monopolist's production decisions
a. microeconomics
b. macroeconomics

Answer :

Answer:

1. B

2. B

3. A

Explanation:

1. The effect of a large government budget deficit on the economy's price level: is Macroeconomics.

2. The effect of an increase in the money supply on the rate of inflation: is Macroeconomics.

3. The effect of government regulation on a monopolist's production decisions: is Microeconomics.

Generally, Economics can be classified into two (2) categories, namely;

1. Macroeconomics can be defined as the study of behaviors, performance and factors that affect the entire economy. Hence, it focuses on aggregate phenomena such as price level, economic growth, Gross Domestic Product (GDP), inflation, unemployment and national income levels with respect to the central bank, demand or supply shocks, government policies, aggregate spending and savings.

2. Microeconomics can be defined as the study of the effect of price and quantity levels through interactions between individual buyers and sellers in various markets.

Hence, it is focuses on analyzing or evaluating the decisions of consumers (buyers) and those of firms (sellers) such as methods of production, pricing; and the manner in which government policies affect those decisions.

Final answer:

Topic 1 and 2 are about macroeconomics which looks at larger, overall economy, including matters like government budget deficits and money supply. Topic 3, concerning a single monopolist's decisions with regard to government regulations, is a matter of microeconomics, which concentrates more on specific entities.

Explanation:

The subject matter of these questions pertain to microeconomics and macroeconomics, which are branches of economics. Here are the categories:

  1. Macroecnomics: The effect of a large government budget deficit on the economy's price level. This deals with the overall economy.
  2. Macroecnomics: The effect of an increase in the money supply on the rate of inflation. This also involves the larger economy as a whole.
  3. Microeconomics: The effect of government regulation on a monopolist's production decisions. Here, we are looking at an individual company, a more specific situation.

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