EconCh5 - Chapter 5 Microeconomics Examines the functioning...

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Chapter 5 Microeconomics – Examines the functioning of individual industries and the behavior of individual decision- making units—business firms and households. Macroeconomics – Deals with the economy as a whole. Macroeconomics focuses on the determinants of total national income, deals with aggregates such as aggregate consumption and investment, and looks at the overall level of prices instead of individual prices. Aggregate behavior – The behavior of all households and firms together. Sticky prices – Prices that do not always adjust rapidly to maintain equality between quantity supplied and quantity demanded. Microeconomic foundations of macroeconomics – The microeconomic principles underlying macroeconomic analysis. Great Depression – The period of severe economic contraction and high unemployment that began in 1929 and continued throughout the 1930s. Fine-tuning – The phrase used by Walter Heller to refer to the government’s role in regulating inflation and unemployment.
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