Economists also look at two realms.

There is big-picture macroeconomics, which is concerned with how the overall

An economy’s macroeconomic health can be defined by a number of goals: growth in the standard of living, low
unemployment, and low inflation, to name the most important. How can macroeconomic policy be used to pursue
these goals? 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 originates the federal budget. 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?

In macroeconomics, the subject is typically a nation—how all markets interact to generate big phenomena
that economists call aggregate variables. In the realm of microeconomics, the object of analysis is a single
market—for example, whether price rises in the automobile or oil industries are driven by supply or
demandchanges. The government is a major object of analysis in macroeconomics—for example, studying
the role it plays in contributing to overall economic growth or fighting inflation. Macroeconomics often
extends to the international sphere because domestic markets are linked to foreign markets through trade,
investment, and capital flows. But microeconomics can have an international component as well. Single
markets often are not confined to single countries; the global market for petroleum is an obvious example.
The macro/micro split is institutionalized in economics, from beginning courses in “principles of economics”
through to postgraduate studies. Economists commonly consider themselves microeconomists or
macroeconomists. The American Economic Association recently introduced several new academic journals.
One is called Microeconomics. Another, appropriately, is titled Macroeconomics.
If Adam Smith is the father of economics, John Maynard Keynes is the founding father of macroeconomics. Although
some of the notions of modern macroeconomics are rooted in the work of scholars such as Irving Fisher and Knut
Wicksell in the late 19th and early 20th centuries, macroeconomics as a distinct discipline began with Keynes’s
masterpiece, The General Theory of Employment, Interest and Money, in 1936. Its main concern is the instability of
aggregate variables. Whereas early economics concentrated on equilibrium in individual markets, Keynes
introduced the simultaneous consideration of equilibrium in three interrelated sets of markets—for goods, labor,
and finance. He also introduced “disequilibrium economics,” which is the explicit study of departures from general
equilibrium. His approach was taken up by other leading economists and developed rapidly into what is now known
as macroeconomics.

WIKIPEDIA

Microeconomics (from Greek prefix mikro- meaning "small" + economics) is a branch of economics that studies the behaviour of
individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals
and firms.[1][2][3]
One goal of microeconomics is to analyze the market mechanisms that establish relative prices among goods and services and
allocate limited resources among alternative uses. Microeconomics shows conditions under which free markets lead to desirable
allocations. It also analyzes market failure, where markets fail to produce efficient results.
Microeconomics stands in contrast to macroeconomics, which involves "the sum total of economic activity, dealing with the issues
of growth, inflation, and unemployment and with national policies relating to these issues".[2] Microeconomics also deals with the
effects of economic policies (such as changing taxation levels) on microeconomic behavior and thus on the aforementioned aspects
of the economy.[4] Particularly in the wake of the Lucas critique, much of modern macroeconomic theories has been built
upon microfoundations—i.e. based upon basic assumptions about micro-level behavior.
fiscal policy
economic policies that involve government spending and taxes
macroeconomics
the branch of economics that focuses on broad issues such as growth, unemployment, inflation, and trade
balance.
microeconomics
the branch of economics that focuses on actions of particular agents within the economy, like households,
workers, and business firms
monetary policy
policy that involves altering the level of interest rates, the availability of credit in the economy, and the
extent of borrowing
Coexistence and complementarity
Microeconomics is based on models of consumers or firms (which economists call agents) that make
decisions about what to buy, sell, or produce—with the assumption that those decisions result in perfect
market clearing (demand equals supply) and other ideal conditions. Macroeconomics, on the other hand,
began from observed divergences from what would have been anticipated results under the classical
tradition.
Today the two fields coexist and complement each other.
Microeconomics, in its examination of the behavior of individual consumers and firms, is divided into
consumer demand theory, production theory (also called the theory of the firm), and related topics such as
the nature of market competition, economic welfare, the role of imperfect information in economic
outcomes, and at the most abstract, general equilibrium, which deals simultaneously with many markets.
Much economic analysis is microeconomic in nature. It concerns such issues as the effects of minimum
wages, taxes, price supports, or monopoly on individual markets and is filled with concepts that are
recognizable in the real world. It has applications in trade, industrial organization and market structure,
labor economics, public finance, and welfare economics. Microeconomic analysis offers insights into such
disparate efforts as making business decisions or formulating public policies.
Macroeconomics is more abstruse. It describes relationships among aggregates so big as to be hard to
apprehend—such as national income, savings, and the overall price level. The field is conventionally divided
into the study of national economic growth in the long run, the analysis of short-run departures from
equilibrium, and the formulation of policies to stabilize the national economy—that is, to minimize
fluctuations in growth and prices. Those policies can include spending and taxing actions by the government
or monetary policy actions by the central bank.
Bridging the micro/macro divide
Like physical scientists, economists develop theory to organize and simplify knowledge about a field and to
develop a conceptual framework for adding new knowledge. Science begins with the accretion of informal
insights, particularly with observed regular relationships between variables that are so stable they can be
codified into “laws.” Theory is developed by pinning down those invariant relationships through both
experimentation and formal logical deductions—called models.
Since the Keynesian revolution, the economics profession has had essentially two theoretical systems, one
to explain the small picture, the other to explain the big picture (micro and macro are the Greek words,
respectively, for “small” and “big”). Following the approach of physics, for the past quarter century or so, a
number of economists have made sustained efforts to merge microeconomics and macroeconomics. They
have tried to develop microeconomic foundations for macroeconomic models on the grounds that valid
economic analysis must begin with the behavior of the elements of microeconomic analysis: individual
households and firms that seek to optimize their conditions.
How they differ
Contemporary microeconomic theory evolved steadily without fanfare from the earliest theories of how
prices are determined. Macroeconomics, on the other hand, is rooted in empirical observations that existing
theory could not explain. How to interpret those anomalies has always been controversial. There are no
competing schools of thought in microeconomics—which is unified and has a common core among all
economists. The same cannot be said of macroeconomics—where there are, and have been, competing
schools of thought about how to explain the behavior of economic aggregates. Those schools go by such
names as New Keynesian or New Classical. But these divisions have been narrowing over the past few
decades (Blanchard, Dell’Ariccia, and Mauro, 2010).
Microeconomics and macroeconomics are not the only distinct subfields in economics. Econometrics, which
seeks to apply statistical and mathematical methods to economic analysis, is widely considered the third
core area of economics. Without the major advances in econometrics made over the past century or so,
much of the sophisticated analysis achieved in microeconomics and macroeconomics would not have been
possible.