Question 4: Explain the difference between microeconomics and macroeconomics.

Answer:

For each of the following, list whether the topic is microeconomic or macroeconomic in nature:

(a.)The price of gasoline. Answer:

(b.)The national unemployment rate. Answer:

(c.)The quantity of new cars sold each year. Answer:

(d.)The wage rate paid to steel workers. Answer:

(e.)The amount of national output in an economy. Answer:

Question 5: What is positive economics and normative economics? Give an example of each.

Answer:

For each of the following, note whether the statement is an example of positive economic analysis or an example of normative economic analysis:

(a.)An increase in the minimum wage will lead to a higher rate of teenage unemployment.

Answer:

(b.)If the government reduces the tax on tobacco, more individuals will start smoking.

Answer:

(c.)The government should lower taxes because tax rates are too high for the average U.S.

family.

Answer:

(d.)Wealthy senior citizens can afford to buy their own health insurance and therefore should

not be given Medicare coverage.

Answer:

(e.)If the price of apples increases, people will buy more bananas.

Answer: