Which of these covers the study of topics such as inflation and unemployment?

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Course Offerings

• Summer 2010
• Fall 2010

Economics Faculty

Course Outlines

• ECO 115
  Consumer Economics
• ECO 200
  Introduction to Economics
• ECO 211
  Microeconomics
• ECO 212
  Macroeconomics
• ECO 210
  Money and Banking

Economics Websites / Resources

What is ECONOMICS?

Economics is the study of making choices.

We need to make choices because we as individuals and as a society experience scarcity. There are not enough resources available to produce all the things we want because resources are limited but our wants are unlimited. The study of economics examines how we make choices. A new boat or a used car? More schools or more highways? More leisure time or more income from work? By examining the trade-offs between the various options that we face when we make choices, economics helps us to understand how to make the best use of our limited resources. Almost all issues of public and private policy involve economics as do your own individual choices.

Course Descriptions

ECO 115 Consumer Economics (3-0) 3 crs.
Introduces the concepts of personal financial planning within the current economic environment. Emphasizes topics such as basic macroeconomic theory, obtaining credit, purchasing insurance, investment alternatives, basic real estate finance and tax planning.

ECO 200 Introduction to Economics (3-0) 3 crs.
Covers descriptive rather than a quantitative approach to the study of economics. Major topics cover economic history, the elements of macroeconomics, microeconomics and a comparative look at other economic systems. Specifically designed for students in career-vocational curricula.
IAI S3 900

ECO 211 Microeconomics (3-0) 3 crs.
Covers economic problems faced by the individual and the firm. Examination of market structures, price and output determination. The microeconomic approach.
IAI S3 902

Microeconomics is a study of the economic behavior of individual units of an economy (such as a person, household, firm, or industry) and not of the aggregate economy (which is the domain of macroeconomics). Microeconomics is primarily concerned with the factors that affect individual economic choices, the effect of changes in these factors on the individual decision makers, how their choices are coordinated by markets, and how prices and demand are determined in individual markets. The main subjects covered under microeconomics include theory of demand, theory of the firm, and demand for labor and other factors of production.

ECO 212 Macroeconomics (3-0) 3 crs.
Covers economic problems faced by our society. Examination of resource allocation, national income and economic development, from a macroeconomic approach.
IAI S3 901

Macroeconomics is a study of the behavior of the whole (aggregate) economies or economic systems instead of the behavior of individuals, individual firms, or markets (which is the domain of Microeconomics). Macroeconomics is concerned primarily with the forecasting of national income, through the analysis of major economic factors that show predictable patterns and trends, and of their influence on one another. These factors include level of employment/unemployment, gross national product (GNP), balance of payments position, and prices (deflation or inflation). Macroeconomics also covers role of fiscal and monetary policies, economic growth, and determination of consumption and investment levels.

ECO 210 Money and Banking (3-0) 3 crs.
Stresses the practical aspects of money and banking, and emphasizes the basic monetary theory needed by the banking student to apply his knowledge to his particular job. Historical treatment has been kept to a minimum. Emphasis is placed on such problems as economic stabilization, types of spending, the role of gold, limitations of central bank control, governmental fiscal policy, balance of payments and foreign exchange, showing their repercussions on the banking industry in affective yield curves and the structuring of portfolios.

Learning Objectives

• Distinguish between macroeconomics and microeconomics

Micro vs. Macro

It should be clear by now that economics covers a lot of ground. That ground can be divided into two parts: microeconomics focuses on the actions of individual agents within the economy, like households, workers, and businesses; macroeconomics looks at the economy as a whole. It focuses on broad issues such as growth, unemployment, inflation, and trade balance. Microeconomics and macroeconomics are not separate subjects but are, rather, complementary perspectives on the overall subject of the economy.

To understand why both microeconomic and macroeconomic perspectives are useful, consider the problem of studying a biological ecosystem like a lake. One person who sets out to study the lake might focus on specific topics: certain kinds of algae or plant life; the characteristics of particular fish or snails; or the trees surrounding the lake. Another person might take an overall view and instead consider the entire ecosystem of the lake from top to bottom: what eats what, how the system remains in balance, and what environmental stresses affect this balance. Both approaches are useful, and both researchers study the same lake, but the viewpoints are different. In a similar way, both microeconomics and macroeconomics study the same economy, but each has a different starting point, perspective, and focus.

Figure 1. Macroeconomists might look at the larger ecosystem in this image, while a microeconomist would focus on specific features.

Whether you are looking at lakes or economics, the micro and the macro insights should illuminate each other. In studying a lake, the “micro” insights about particular plants and animals help us to understand the overall food chain, while the “macro” insights about the overall food chain help to explain the environment in which individual plants and animals live.

In economics, the micro decisions of individual businesses are influenced by the health of the macroeconomy—for example, firms will be more likely to hire workers if the overall economy is growing. In turn, the performance of the macroeconomy ultimately depends on the microeconomic decisions made by individual households and businesses.

Microeconomics

What determines how households and individuals spend their budgets? What combination of goods and services will best fit their needs and wants, given the budget they have to spend? How do people decide whether to work, and if so, whether to work full time or part time? How do people decide how much to save for the future, or whether they should borrow to spend beyond their current means?

What determines the products, and how many of each, a firm will produce and sell? What determines what prices a firm will charge? What determines how a firm will produce its products? What determines how many workers it will hire? How will a firm finance its business? When will a firm decide to expand, downsize, or even close? In the microeconomic part of this text, we will learn about the theory of consumer behavior and the theory of the firm.

Macroeconomics

What determines the level of economic activity in a society or nation?—that is, how many goods and services does it actually produce? What determines how many jobs are available in an economy? What determines a nation’s standard of living? What causes the economy to speed up or slow down? What causes firms to hire more workers or lay them off? Finally, what causes the economy to grow over the long term?

An economy’s macroeconomic health can be assessed by a number of standards or goals. The most important macroeconomic goals are the following:

• Growth in the standard of living
• Low unemployment
• Low inflation

Macroeconomic policy pursues these goals through monetary policy and fiscal policy:

• Monetary policy, which involves policies that affect bank lending, interest rates, and financial capital markets, is conducted by a nation’s central bank. For the United States, this is the Federal Reserve.
• Fiscal policy, which involves government spending and taxes, is determined by a nation’s legislative body. For the United States, this is the Congress and the executive branch, which establishes the federal budget.

To keep the differences between these policies straight, remember that the term monetary relates to money, and the term fiscal relates to government revenue or taxes.

These are the main tools the government has to work with. Americans tend to expect that government can fix whatever economic problems we encounter, but to what extent is that expectation realistic? These are just some of the issues that will be explored later in this course.

Try It

WAtch It

The differences between microeconomics and macroeconomics as well as their respective and focal points are explained again in the following video:

Glossary

fiscal policy: economic policies that involve government spending and taxesmacroeconomics:  the branch of economics that focuses on broad issues such as growth, unemployment, inflation, and trade balancemicroeconomics: the branch of economics that focuses on actions of particular agents within the economy, like households, workers, and businessesmonetary policy: policy that involves altering the level of interest rates, the availability of credit in the economy, and the extent of borrowing

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Which of the following covers a study of topics such as inflation or unemployment?

Which of the following covers the study of topics such as inflation or unemployment microeconomics?

Is inflation study part of microeconomics or macroeconomics?

What is the study of macroeconomics?