Week 1: Micro and Macro: The Economic Divide (glossary)

Microeconomics

The study of individual markets and the behavior of consumers and firms in making decisions about the allocation of limited resources.

Macroeconomics

The study of the economy as a whole, focusing on aggregate variables such as national income, inflation, and unemployment.

Aggregate Variables

Economic indicators that reflect the performance of the entire economy, such as GDP, unemployment, and inflation rates.

Equilibrium

A state in which supply equals demand in a market, resulting in stable prices.

Market Failure

A situation where markets do not allocate resources efficiently on their own, often justifying government intervention.

General Equilibrium

A condition in which all markets in an economy are in simultaneous equilibrium.

Disequilibrium

A situation where market forces are out of balance, leading to excess supply or demand.

Monetary Policy

Actions taken by a central bank to control the money supply and interest rates to influence economic activity.

Economic Welfare

The overall well-being and standard of living of individuals in an economy, often related to resource allocation and income distribution.

Econometrics

The application of statistical and mathematical techniques to test hypotheses and forecast future trends in economics.