Top-21 Micro-Macro Questions | Micro-Macro Paradoxes Explained

Micro-Macro Paradox Explained

Microeconomics depends on Macroeconomics

1. The law of demand came into existence from the analysis of the behavior
   of a group (aggregate) of people.
2. The wage rate of an individual firm depends on the general wage level in
   the economy.
3. The price of a commodity is influenced by the general price level prevailing
   in the economy.

Macroeconomics depends on Microeconomics

1. The national income of a country is nothing but the sum total of incomes of
   individual units of the country.
2. Aggregate output is the sum total of the output of different individual economic
   units working in the economy.
3. Aggregate demand depends on the demand of individual households of the
   economy

Micro-Macro Questions [Paradoxes]

The paradox is a seemingly absurd or contradictory statement, though, often a
true statement. Sometimes, there are paradoxes seen in Micro and Macro
activities. It means, an act that is beneficial for an individual, may prove
to be harmful to the economy as a whole.

For example
(i) If an individual saves, his family will be benefitted, but if the whole
economy starts savings, it will result in a contraction of demand, output,
employment, and income. As a result, the whole economy will suffer.

(ii) If a depositor withdraws all his money from the bank, it hardly makes
any difference, but if all the depositors in the economy do it at the same
time, the banking system will collapse.

Micro-Macro Paradox Questions

Q1. Identify the following as Microeconomic study and Macroeconomics study :
(i) Production of a sugar mill (ii) Inflation rate; (iii) Car Industry; (iv)
Supply of money; (v) Wage determination in a company; (vi) Allocation of
resources; (vii) Household expenditure; (viii) Aggregate demand; (ix) Foreign
exchange rate; (x) Market demand for apples.
Micro Economic study : (i), (iii), (iv), (vi), (vii), (x)
Macro Economic study : (ii), (iv), (viii), (ix)

Q2. Under which branch of economics are the aggregates of the economy dealt
with?
ANS: Macro Economic

Q3. Is the study of the cotton textile industry a macroeconomic study or a
microeconomic study?
ANS: Micro Economic

Q4. Which branch of economics deals with the price determination of a commodity
?
ANS: Micro Economic

Q5. State whether the study of national income is a microeconomic study or a
macroeconomic study.
ANS: Macro-Economic

Q6. Ms. Nidhi is interested in knowing the change in quantity produced by a
farmer with a fall in the price of a product. Which branch of economics would
she study to ascertain the change?
ANS: Micro Economic

Q7. Mention any four microeconomics areas or subjects?
Ans. a. Demand and supply
b. Production and cost of production
c. Pricing of product.
d. Pricing of factor services.

Q8. Mention any four macroeconomics events?
Ans. a. Rate of inflation.
b. Level of employment
c. Change in agricultural and industrial production.
d. Foreign exchange reserves.

Q9. Give examples of macroeconomic variables.
Ans. Following are the examples of macroeconomic variables :
a. Total output of the economy.
b. Distribution of output.

Q10. What constitutes the central theme of macroeconomics?
Ans. Theory of National Income and employment constitutes the central theme
of macroeconomics.

Q11. Ms. Chavi is interested in knowing what is the level of employment and
unemployment in India. Which branch of economics she would study?
Ans. Macroeconomics

Q12. Ram is interested in knowing what is happening in the economy. Which
branch of economic should he study?
ANS: Macro-Economic

Q13. Name any two groups that are interested in the study of macroeconomic
events. ANS: (i) Government ; (ii) Entrepreneurs

Q14. Whether the study of employment, unemployment and money and banking
in India is a microeconomic study or a macroeconomic study?
ANS: Macro-Economic

Q15. Why is the study of the problem of unemployment in India considered a
macroeconomic study?
ANS: The study of unemployment is considered a macroeconomic study as it
relates to the Indian economy as a whole.

Q16. Determination of price profit, cost, quantity, etc. is a subject matter of
which branch of economics?
ANS: Micro Economic

Q17. Which of the following is a Macroeconomic study : (i) Government Budget of
an economy; (ii) Producer’s Equilibrium (iii) Consumer’s Equilibrium?
ANS: Government Budget

Q18. Which branch of economics deals with the allocation of resources in an
economy?
ANS: Micro Economic

Q19. Give an example to show that an item that is kept constant in
microeconomics is considered a variable in macroeconomics.
ANS: National income is kept constant in microeconomics but in macroeconomics,
it is considered.

Q20. What constitutes the central theme of macroeconomics?
ANS: Theory of National Income and Employment constitutes the central theme
of Macro Economics

Q21. What was the need for a separate theory of macroeconomics?
ANS: To understand the working of an economic system as well as to
explain the various macroeconomic paradoxes.