As you read the macroeconomics chapter in A Course in Macroeconomics, you will find a lot of similarities between micro and macro economics. While you can learn a lot from macro theory, micro is much more relevant to the business world.
You will find that in both macro and micro economics there are similarities of course. Both are concerned with the growth of the economy. There are some differences however, especially in the interest rates that are used to determine the size of the economy.
Microeconomics is concerned with how interest rates affect inflation and the value of money. In macroeconomics, the government attempts to stimulate the economy by using tax and spending policies. The purpose of these types of programs is to increase the size of the economy so that it can create jobs.
In both micro and macro economies interest rates are determined. This includes determining when a loan or a purchase has to be made. In the case of interest rates, the lower the interest rate, the more money a company has to invest in order to make a profit. The higher the interest rate, the less money a company has to spend on paying off their loans and purchases.
This interest rate is important because it determines how much a loan will cost to a business. If they have to make the loan at an interest rate that is too high, then they can actually lose money. The opposite happens if they need to borrow money at too low of an interest rate.
While interest rates affect how much money a company must pay, they do not affect the amount of money they have to invest. All investments are made by the company that owns the business. The money they borrow and invest is what makes the business a success.
When interest rates change, the amount of money that a business must pay on loans and purchases is affected. However, the interest rate is only one part of the picture. In order to attract new customers, a business also needs to advertise and sell their products and services. With the lower interest rate that a company receives, the business is more attractive to people who are looking for work.
With a lower interest rate, companies need to do a better job of selling their products and services. They need to spend less time looking for clients and more time looking for jobs. These two things will in turn lead to more new jobs being created and more money being spent by businesses.
So while both macro and micro economics focus on the overall growth of the economy, there are some major differences between the two. The purpose of this lesson is to teach students how economics affects the business world.