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IAI Actuarial Core Principles · Business Economics · Relationship between economics and business

Which feature best distinguishes microeconomics from macroeconomics in analysing an Indian bank's business environment?

Microeconomics examines individual decision makers and markets, such as how a bank prices a deposit product, whereas macroeconomics examines economy-wide aggregates like national output, unemployment and the general price level. The split is about scope, not firm size or sector.

  1. AMicroeconomics studies individual markets and decision makers, such as pricing of a bank's deposit product, while macroeconomics studies aggregates such as national output and the general price levelCorrect
  2. BMicroeconomics deals with small firms only, while macroeconomics deals with large firms only
  3. CMicroeconomics is normative, while macroeconomics is positive
  4. DMicroeconomics ignores scarcity, while macroeconomics is built on it
  5. Microeconomics concerns only the public sector, while macroeconomics concerns only the private sector

Explanation

The distinction is between analysis of individual units and markets versus economy-wide aggregates like GDP, unemployment and inflation. It is not about firm size, sector or normative versus positive, and both branches rest on scarcity.

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