Question

Suppose that the U.S. federal government has borrowed \(500 billion to expand its total spending on goods and services across the entire economy in an effort to boost by \)500 billion the aggregate production by the nation's firms. Would we apply microeconomic or macroeconomic analysis to analyze this policy action?

Short answer

We apply macroeconomic analysis to analyze the policy action.

Step-by-step solution

Step 1. Definition of macroeconomics.

Macroeconomics is the study of the economy as a whole. It studies the aggregates.

Step 2. Reason.

We apply macroeconomic analysis to analyze the policy action since the aggregate production of the nation is considered.