Economics for Business: Microeconomics, Macroeconomics, Growth Theories, and Domestic Economic Policy

Explore the concepts of microeconomics, macroeconomics, growth theories, and domestic economic policy in Economics for Business. Learn about the relationship between micro and macroeconomics, types of growth theories, and the impact of domestic economic policies on the economy.

Economic for Business

MAIN BODY
Question 1
The two branches of economics are divided into two categories namely: microeconomics
and macroeconomics. The microeconomics is a concept which deals with the study of
individuals and is dependent on the business decisions. On the other hand, the concept of
macroeconomics is based on the decisions that the government of the respective country
undertakes. Microeconomics stems from the ease of their design and this near-real reality that,
through a method of interest and supply, they communicate with the rest of the world to
guarantee the movement of labour and products in objective markets (Cao and Shi, 2021). This
effectively investigates the movement of a given topic and further dissects a given time stamp,
with the goal that they can correctly perceive the sub-field in terms of finance. The field is also
concerned with restrictive infrastructure, cartels, certain types of cruelty. The financial aspects of
applying government aid are concerned with the realization of specific microeconomics. It
fundamentally manages the costs and benefits of some random project.
Macroeconomics emphasizes financial aspects of general execution, changes in
expansion, outcomes, premiums and unfamiliar trade rates, and balancing of instalments. Issues
of demand reduction, social value, and economic development do exist and can be imagined
through sound money-related approaches. In a nutshell, it is a financial matter related to
investigating how the economy behaves and executes. This basically revolves around general
changes in the economy, including the pace of development, gross domestic product and
expansion.
Microeconomics Macroeconomics
It taken into consideration the actions of
individual units which can be accessed as the
It is the study of economics which assesses a
single and the only unit of the combination

name of individual firm, market, industry and
many more.
which comes up with a combination of firms,
households, countries, industries and markets.
The tools which are utilised in this is the
concept of demand and supply.
It deals with the tools and techniques of
aggregate demand and supply.
The variable which are utilised in this is the
behaviour of the economic unit of an
individual business entity (Debackere and
et.al., 2019).
The variables which are used in it are the taxes,
public expenditures, private consumption,
savings and investment, balance of payment
and many others.
The assumption taken in this is the all the
variables of the macroeconomics is constant in
the concept of microeconomics.
The assumption taken in this is the opposite of
microeconomic variables and in this all the
microeconomic variables are constant.
It deals with the individual economic variables It deals with the aggregate variables of
economics.
The operational and internal issues are applied
in the business application of microeconomics
The external and environmental issues of the
business application.
The concept of it is concerned with the theories
of product pricing, factor pricing, and
economic welfare.
The theories of national income, aggregate
consumption, economics growth and the
general price level is defined under this.
Relationship between microeconomics and macroeconomics with example:
The link between microeconomics and macroeconomics varies in specific areas of premium, and
it lies in the fact that the overall degree of creation and exploitation is a consequence of decisions
made by buyers and firms in objective markets. Macroeconomics focuses on the choices of
people and businesses, while comprehensive financial affairs dissect the choices made by states
and public authorities. Furthermore, microeconomic bargaining in the organic market and
different factors that affect the benefits of a given commodity, such as commodity cost, customer
payment, buyer tastes and inclinations, buyer future assumptions, etc. (Dźwigoł, 2020).
Question 2
Floating transaction rates, currency-related strategies lead to changes in loan fees and
transaction rates. When trade rates are adjustable, global net capital flows link trade rates to

changes in domestic financing costs. Given the long-term expected switch size, higher lending
costs in the short-to-medium term lead to capital inflows, unfamiliar trade inventories in
unfamiliar trade markets, and thus lower swap sizes. On the other hand, lower local financing
costs compared to global interest rates lead to higher switching scales (Hühn, 2019).
Subsequently, current financial arrangements and expected future currency-related
approaches heavily influence the apparent size of the conversion as well as the local economy
and the global severity of AD. Changing the current loan fees in a short period of time has little
effect on the size of the switch. Nonetheless, reasonable changes in currency-related strategies
during supported periods would result in large and relentless changes in current transaction rates,
an important calculation in the financial transmission portion. This will seriously affect the real
economy.
In an open economy with adjustable trade rates, financial arrangements do not affect total
interest through the impact of loan fees on utilization and risk. Changing loan fees by changing
the size of the switch also changes the intensity of global goods and imports. Net product
changes in a similar way to domestic consumption, amplifying the impact of changes in interest
on total interest. Lower loan fees help home-grown usage, improve switching standards, and
increase net product. Higher loan fees reduce indigenous usage, lower switching standards, and
lower net merchandise. Currency-related strategies are more impressive at adaptive trade rates
than in closed economies due to linkages through the local and global consumption components.
The relative effectiveness of monetary and fiscal policy has been the subject of controversy
among economists. The monetarists regard monetary policy more effective than fiscal policy for
economic stabilisation (Jian, Yongqiang and Hyoungmi, 2018).
Flexible exchange rates and excellent capital liquidity undermine the extension of
financial strategies, but not the viability of monetary approaches. In an open economy with fixed
trade rates, financial arrangements can potentially change to keep loan fees fixed to protect swap
sizes. Funding costs will not change to aid monetary arrangements or to moderate the impact of
monetary strategies. Therefore, any decline in home-grown interests can be balanced by
monetary developments to help rebuild possible outcomes. Assuming that the adjustment of
domestic interest is the main explanation for the exit harmony of continuous record balances, this
financial development will likewise re-establish continuous record balances.

Financial arrangements can be an important adjustment strategy under fixed trade rates. It
helps make up for the way money-related strategies are not available at this time. Programmatic
currency stabilizers take on this part. Optional changes in government spending or spending are
valuable if the monetary approach can respond quickly to impermanent shocks. In some political
frameworks, such as in Canada, this makes sense. In other countries, such as in the United States,
Congress and the president may come from various gatherings, the choice of spending plans is
wider, and the rapid changes in financial strategy are more troublesome (Kukharenko and et.al.,
2019).
In a prolonged downturn, alternative financial strategies can play a crucial role in
revisiting potential outcomes, if it is not constrained by high open debt ratios. With the loan cost
attached to the scale of the conversion, financing the financial expansion does not push up
interest rates to use the classified areas heavily; nor does the economic recovery bring about
higher interest rates. To be sure, currency strategy is the main viable home-grown benefit for
executive tools.
High open debt ratios and concerns about the risk of sovereign defaults have led to
problems with currency arrangements. This is what is happening in Europe. Monetary expansion
is unthinkable given the reluctance of the money business sector to buy additional sovereign debt
from the current downturn with high debt ratios. Then again, fiscal rigor to rein in shortfalls and
debt ratios has exacerbated the recession and may try to raise the current high debt ratios as GDP
and net government revenue fall. The euro fixes the exchange rate for intra-European trade and
prevents the escalation of the devaluation of cash. Neither home-grown finance nor currency-
related strategies provide an answer.
Question 3
Growth of a firm depends on the level of output generated by the organisation, in order to
increase the profitability organisation needs to increase the manufacturing of products. Company
cannot increase it profit percent of the organisation because it will increase the cost of the
product and decrease the sale of the product. The firms mainly grow because of the level of
output of the organisation will increase with the increase in the level of output (Mora-Sanguinetti
and Pérez-Valls, 2021).

Growth refers to the growing of the production of economic goods and services over a
specific period of time. It is measured in real or nominal term which also includes adjusted
inflation. Aggregate economic growth is dignified in Gross National Product (GNP) or Gross
Domestic Product (GDP).
There are three types of growth theory:
1. Classical Growth Theory: This theory suggest that the growth of the economy will
decreases with the increase in the population. This theory belief that the classical growth
theory, economist believes that the increase in the real GDP per person will increase the
population.
2. Neoclassical Growth Model: This theory model outline that how a steady economic
growth occurs when there are three economic factors plays vital role in the economy
namely, Labour, technology and Capital. The most common method of Neoclassical
Growth Model is Solow-Swan Growth Model (Oppedal Berge and Garcia Pires, 2020).
3. Endogenous Growth Theory: This theory states the economic growth is generated in the
economy itself that is endogenous forces and not the exogenous ones. This theory
contrast with the neoclassical growth model that claims external factors such as
technological progress is the foremost source of economic growth.

In accordance with the theory of growth, profit maximization level of output and profit is as
follows,
According to the Classical growth theory the profit will decrease with the increase in the
population thus the production needs to be low which will indirectly increase the profits.
According to the Neoclassical Theory the profit can be maximised by considering the
factors which will influence the profits of the firm. This theory suggest that the profits can be
maximised by gradually increasing the production which will increase the profits from the
production.
According to the Endogenous Growth Model suggest that the product which are familiar
can be produced more to increase the profits. The level of output should be increased in numbers
to increase the profit associated with the product. This model will increase the profitability in the
short run as it will increase the production which will amount to profit maximisation (Toh,
2019).
Question 4
Domestic economic policy '
The domestic economic policy is defined as the changes in the taxes and the government
regulations in order to conduct any type of business operations. Throughout the 20s it is
identified that the government pro-business policies which were reflected in the tax cuts. It is
observed that in such cases the economy aided by decline in the expenditure of the government.
The government was focusing on the shield domestic interest from the foreign competition. It
was applied that the regulatory reinforcement was tax during the 1920s, but in this case the
government promote the new industries. For example, the civil aviation’s was assisted by the
government splinting of the United States airmail contracts. It is identified that the Air commerce
act of 1926, which has concerned with the federal funding for the construction of the airport,
which aided in the expansion of the new transportation system within the economy. In the
domestic economy the high tariffs have the high chances of the consequences which made more
difficult for the European Union to say the war debts to the United states. This resulted in the
war and the people have suffered a lot in making the higher taxes because of the changes in the
polices and the government regulations with the European Union and the Unites States (Ughetto
and et.al., 2020).

The agriculture aspect which is not sharing in the prosperity of the rest of the economy.
There were the boom years for the farmers which was started in the yearly 1920s, which helped
the farmers to gain in rise in the prices of the commodity there were the crisis in the agriculture
sector which was hardly affectively in the negative way to the people who are invoked in the
agriculture sector because of the changes in the economy. This was the problem I which was deal
by the Mcnary- Haugen Bill, to deal with the purchases of the government which is surplus of
the staples such as corn, cotton, wheat, it is very important for the government to regulate them
polices for the purchase of the raw material in order to be competitive and gain the advantage.
Communication strategies can be described as goals, rules, norms and guidelines for
participating in inter-state communication. These strategies are country-specific and developed
by their public authorities. A country's exchange strategy includes mandatory fees for review
guidelines, imports and goods, and levies and parts.
Trade is critical to ending global poverty. Countries available for global exchange typically
become faster, improve, and further increase efficiency, leading to higher incomes and more
open doors. Open exchange also helps low-income households by providing buyers with more
reasonable labour and products. Coordination with the world economy through exchanges and
global value chains helps drive financial development and reduce local and global demand. The
World Bank Group's commitments to countries such as Bosnia and Herzegovina, Macedonia,
and Indonesia have made cross-border exchanges easier, stabilized factor benefits of
coordination, and streamlined customs clearance strategies. These and other businesses
contribute to a more open, reliable and unsurprisingly global framework of exchange for all.

REFERENCES
Books and Journals
Cao, Z. and Shi, X., 2021. A systematic literature review of entrepreneurial ecosystems in
advanced and emerging economies. Small Business Economics, 57(1), pp.75-110.
Debackere, K. and et.al., 2019. Vlaams Indicatorenboek 2019 (No. 645755). KU Leuven,
Faculty of Economics and Business (FEB), ECOOM-Centre for Research and
Development Monitoring.
Dźwigoł, H., 2020. Interim Management as a New Approach to the Company Management.
Review of Business and Economics Studies, 8 (1), 20-26.
Hühn, M.P., 2019. Adam Smith’s philosophy of science: Economics as moral
imagination. Journal of Business Ethics, 155(1), pp.1-15.
Jian, L., Yongqiang, Z. and Hyoungmi, K., 2018. The potential and economics of EV smart
charging: A case study in Shanghai. Energy policy, 119, pp.206-214.
Kukharenko, E.G. and et.al., 2019, March. On the introduction of digital economics in the
transport industry. In 2019 Systems of Signals Generating and Processing in the Field of
on Board Communications (pp. 1-5). IEEE.
Mora-Sanguinetti, J.S. and Pérez-Valls, R., 2021. How does regulatory complexity affect
business demography? Evidence from Spain. European Journal of Law and
Economics, 51(2), pp.203-242.
Oppedal Berge, L.I. and Garcia Pires, A.J., 2020. Gender, formality, and entrepreneurial
success. Small Business Economics, 55(4), pp.881-900.
Toh, M.Y., 2019. Effects of bank capital on liquidity creation and business diversification:
Evidence from Malaysia. Journal of Asian Economics, 61, pp.1-19.
Ughetto, E. and et.al., 2020. Female entrepreneurship in the digital era. Small Business
Economics, 55(2), pp.305-312.