II. Categorize each of the following issues as the subject of either microeconom
ID: 1118308 • Letter: I
Question
II. Categorize each of the following issues as the subject of either microeconomics or macroeconomics or the subject of neither microeconomics nor macroeconomics. Explain your answers briefly. (Hint: do not rewrite the statements, put letters only and give your explanations) (a) An effective union strike in metallurgy brought about higher wages for insiders. (b) A family chooses not to have more than one baby (c) The Central bank increased the rate of growth of the money supply (d) This year the budget deficit is expected to rise by 5%. (e) A worker decides to work overtime to receive higher income. () The price of gasoline increased relative to the price of other energy resources. (g) Government imposes the higher taxes on automobile producers. (h) Due to falling oil prices Russian trade surplus may go down. (i) A student decides to spend more time to study mathematics, rather than economics. G) Favorable weather conditions will mean a good harvest this year (k) New computer technology brings falling prices and growing sales of computers. () Last week "The First City Bank" lowered interest rates on loans to private enterprises (m) Purchases of durable goods fall resulting from increased government price controls on durable goods production. (n) A firm will invest in a machine if the expected rate of return is sufficiently high. (o) A cut in federal income taxes is expected to increase consumer spending. (p) A rise in the unemployment rate signals the beginning of the recession in the New York areaExplanation / Answer
a. Macroeconomcis, As it deals with labour supply and wages
b. neither, it can be a part of development economics
c. Macro, we deal with money supply and central bank in Macroeconomics
d. Macro, the Study of govt budgeting is a part of Macro.
e.micro, labour supply decisions are based on microeconomic optimisation of labour and leisure.
f.micro, we are looking into partial elasticity
g.Micro, as we are dealing with one particular industry. here the MC for the industry will increase.
h. Marco, Part of BOP hence macro
i.Micro, allocation of time can be stated as a utility maximisation problem.
j.none (can be macro if you wish to link it with aggregrate price level and inflation)
k. Micro, we are focusing only on computer industry only.
l.Macro, Interest and loans form a part of credit creation and thus the money supply.
m. Macro, we are talking about the effect of durable goods on the economy as a whole.
n. Micro, it deals with the rental cost of capital and is associated with one firm.
o. Macro, Consumption behavior of HHs is a macro variable.
p. Macro, Unemployment is an economy wide phenomena
Hope this helps.