Macro vs Micro Economics - Answer Sheet

Name:

Date:

📚 Part 1: Multiple Choice - Identifying Economic Concepts

1. Which of the following is an example of microeconomics?

UK inflation rate rising to 4%

A small bakery in Auckland deciding to increase bread prices

Government setting interest rates

National unemployment figures

Answer: A small bakery in Auckland deciding to increase bread prices

Explanation: This involves an individual business making pricing decisions, which is studied in microeconomics.

2. Macroeconomics focuses on:

Individual consumer choices

Single company profits

The entire economy's performance

One market's supply and demand

Answer: The entire economy's performance

Explanation: Macroeconomics studies the economy as a whole, including national indicators like GDP, inflation, and unemployment.

3. Which of these would be studied in BOTH micro and macroeconomics?

Energy price increases

Consumer spending patterns

Government policy effects

Market competition

Answer: All options can be studied from both perspectives

Explanation: Energy prices affect individual businesses (micro) and national inflation (macro). Consumer spending affects individual markets (micro) and GDP (macro).

✏️ Part 2: Classification and Analysis

4. Classify each scenario as Microeconomic (MI) or Macroeconomic (MA):

a) Reserve Bank of New Zealand raises interest rates: MA

b) A Wellington café reduces staff hours due to low sales: MI

c) National unemployment rate falls to 3.2%: MA

d) Two supermarket chains compete for customers in Christchurch: MI

e) Government introduces new tax policy: MA

5. Explain the difference between microeconomics and macroeconomics in your own words:

Sample Answer: Microeconomics studies individual parts of the economy like single businesses, consumers, or specific markets. Macroeconomics looks at the whole economy including things like national inflation, unemployment, and government policies that affect everyone.

6. A sudden increase in petrol prices occurs in New Zealand. Describe ONE microeconomic effect and ONE macroeconomic effect:

Sample Answer:

Microeconomic effect: A delivery company in Hamilton may need to increase delivery charges to cover higher fuel costs, affecting their customers and competitors.

Macroeconomic effect: Higher petrol prices contribute to national inflation, potentially leading the Reserve Bank to adjust interest rates and affecting the entire economy's purchasing power.

🎯 Part 3: Real-World Application

7. You are advising a small business owner in Dunedin who wants to expand their coffee shop. List TWO microeconomic factors they should consider:

Sample Answers:

• Local competition from other coffee shops

• Customer demand in their specific area

• Cost of hiring additional staff

• Rent prices for larger premises

• Supplier costs for coffee beans and equipment

8. The New Zealand government is concerned about rising inflation. Explain how this macroeconomic issue might affect individual households:

Sample Answer: Rising inflation means prices for everyday goods like food, petrol, and housing increase. This reduces households' purchasing power, meaning families can buy less with the same income. Some families may need to cut spending on non-essential items or find ways to increase their income.

9. Create a simple example showing how a microeconomic decision can have macroeconomic effects:

Sample Answer: If many individual businesses across New Zealand decide to reduce their workforce due to high costs (microeconomic decisions), this leads to higher national unemployment rates (macroeconomic effect). Higher unemployment then reduces overall consumer spending, which can slow economic growth across the entire country.