According to the modern economic theory, macroeconomic policy is considered as the management of the economy by the central government. Micro-economic policy is considered as the economic management and direction by the state through the central government.
Micro economic policy deals with the monetary policy and macro with fiscal policy. The micro-economic policies are usually directed by the central government and its interest rate is fixed at a level to provide growth to the economy. The macroeconomic policies however are directed by the state to direct growth in the economy.
Micro and macro analysis on economic policy aims at analyzing the economy with respect to different perspectives. This is done so as to create a clear picture of how the economy works. The micro-economic analysis is mostly about the factors influencing the money supply and the business cycle. The macro economic analysis deals with the macro-economic factors affecting the economy such as the unemployment rate, the income level, inflation rates and other economic indicators.
Micro-economic analysis has its limitations especially in terms of data and understanding it. A micro-economic analysis usually relies on the macro-economic analysis to provide an overall picture of the economy. The macro economic analysis focuses on the trends and changes in the economy over time, which may not be relevant to the micro-economic conditions. Micro-economic policy is considered as one of the most important tools in managing the economy but it can only give us an overview of the situation.
The concept of macro and micro economic policy is an effective tool in managing the economic system. It helps in creating a framework of policy and guiding the economy in a way that will lead to growth of the economy.
Micro-economic policy and macro-economic policy have both an influence on the economy and they should be kept in mind while planning the economic policies. The government should consider all the possible angles before making the decision on economic policies and when planning to implement them.
The modern economic theory on micro and macro analysis also helps in planning and implementing the policies. The development of the economy is affected by these policies on a long term basis. The growth of the economy depends on the policies implemented. This is why the government should consider the development of the economy before taking decisions.
Micro-economic policies can be implemented in different ways. The government can implement the policies through direct fiscal or monetary policy.
The direct fiscal policy, in this case, is done through the central government through its expenditure and revenue department. The direct control is done by the central government by cutting down expenditure and increasing tax revenues to provide more funds for the government agencies. The direct monetary policy means the government is able to control the interest rates by printing more money and decreasing its current supply by issuing bonds and equities and currency in order to stimulate the economy.