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What does it mean when we say that macroeconomics is the forest, whereas microeconomics...

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cathy-cobb | eNoter

Posted November 5, 2013 at 2:43 AM via web

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What does it mean when we say that macroeconomics is the forest, whereas microeconomics is the trees?  Which topics are important in macroeconomics?  Which topics are important in microeconomics?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted November 5, 2013 at 2:55 AM (Answer #1)

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Macroeconomics is the “forest” because it is concerned with the big picture.  Microeconomics is “in the trees” because it is concerned with the details that make up the “forest.”

Microeconomics is the study of parts of the economy that are relatively small.  There are huge numbers of topics that can be important in microeconomics.  For example, microeconomics could be concerned with what will happen to the amount of hours that workers will work if the minimum wage is increased in a city or state.  Microeconomics is also concerned with things like individual industries.  A microeconomic question could be “what will happen to the profitability of the oil companies if fracking continues to expand?”  There can be any number of relatively little questions like that in microeconomics because microeconomics is concerned with everything from the state of a given industry like oil to the ways in which individual households decide what they will buy. 

Macroeconomics is the study of economies as a whole.  Macroeconomics generally only looks at the state of an entire national economy, though it can also look at things like the overall economy of a state or a region.  Macroeconomics is concerned with two main things.  It wants to learn how to make sure that the national economy grows at a good pace and it wants to learn how to make sure that the economy does not grow so fast that inflation ensues.  Questions in macroeconomics generally center around whether certain things (tax hikes, national debt, government shutdowns, etc.) will have good or bad effects on the economy of the country as a whole. 

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