What is economics? Place the appropriate label to classify each scenario as either microeconomic or macroeconomic. Drag each item on the left to its matching item on the right. Note that every item may not have a match, while some items may have more than one match. + microeconomic + macroeconomic A laid-off worker enrolls in job re-training. The inflation rate rises. Nationwide, new housing construction declines for the third month in a row. A team of three partners starts a new ad agency.
The Correct Answer and Explanation is:
What is Economics?
Economics is the study of how individuals, businesses, governments, and societies choose to allocate limited resources to satisfy unlimited wants. It examines how these agents make decisions, how they interact in markets, and how the outcomes of these decisions affect overall well-being.
Economics is generally divided into two main branches: microeconomics and macroeconomics.
- Microeconomics focuses on individual units such as households, firms, and markets. It examines how these agents make choices about what to buy, sell, or produce.
- Macroeconomics deals with the economy as a whole. It studies broad phenomena like inflation, unemployment, economic growth, and monetary or fiscal policy.
Classification of Scenarios:
- A laid-off worker enrolls in job re-training → Microeconomic
Reason: This is an individual decision made by a person responding to changes in employment. It deals with personal choices and the labor market at an individual level. - The inflation rate rises → Macroeconomic
Reason: Inflation is a measure of the overall increase in prices across the economy. It reflects changes in the purchasing power of money and is a key indicator in macroeconomic analysis. - Nationwide, new housing construction declines for the third month in a row → Macroeconomic
Reason: This is a national trend affecting the housing market as a whole. It involves aggregate economic activity and has implications for GDP and employment. - A team of three partners starts a new ad agency → Microeconomic
Reason: This involves a decision by a small group of individuals to enter the market and form a business. It relates to entrepreneurship and firm-level behavior.
Summary of Matches:
- Microeconomic:
- A laid-off worker enrolls in job re-training
- A team of three partners starts a new ad agency
- Macroeconomic:
- The inflation rate rises
- Nationwide, new housing construction declines for the third month in a row
