Question

Answer the following questions:

1.) The economy is in a recession and Congress passes legislation to reduce income taxes and shorten the recession. Tom, seeing an increase in his take-home pay, goes to Best Buy and purchases a new television. Why is the Congressional tax cut a macroeconomic issue, while Tom's new TV is a microeconomic issue?

2.) Your boss is impressed with your performance over the past year and has decided to give you a 5% increase in your salary. Are you unambiguously better off with your increased salary? What factors need to be considered?

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1.) Microeconomics is concerned with the economics of individuals and firms whereas macroeconomics is the study of economies as a whole. The two disciplines are related because the economics of individuals and firms, and the government, collectively, are the subject of macroeconomics. Tax policies are made by the government and impact individuals and firms collectively. It is therefore a macroeconomic issue. Although influenced the government’s tax policy, Tom’s purchase of the TV is an individual economic decision and in therefore a microeconomic issue....

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