Economics is the study of money which makes it, who gets it and how it moves around. That’s a broad way to define economics, and more accurately super broad may be more apt. There are different varieties of economics; different philosophies that govern how money, or better yet, wealth, is divided amongst people. These include communism, socialism, and the form we in the United States are familiar with capitalism. Each of these economic variations has different principles on how wealth is distributed among the people.
In this study of wealth, no matter if you are looking at capitalism or some other shade of economic philosophy, there are two ways to study economy microeconomics and microeconomics.
Macroeconomics looks at the economy from about 10,000 feet. It involves understanding the economic condition on a large scale. Interest rates, for instance, are considered a macroeconomic principle. Interest rates, the rate a bank charges an individual or business to borrow money, can be changed based on the general direction of the economy. So, when times are tough, and people are not spending enough to keep business profitable, let’s say because the housing market blew up and people couldn’t afford to pay the bank back for their home loans, which basically occurred in 2008, interest rates were lowered to stimulate spending. This cushioned the overall economy that drove markets and spread wealth widely among the United States.
This was an example of macroeconomics. Wealth, or in this case access to wealth, was allocated over a wide area with the hopes of making a bad economic situation, making wealth more readily available for many.
Microeconomics is the study of how individuals spend their money. Better yet, microeconomics is a look at how wealth is moved at the ground level. How a department store arranges its goods is a deliberate choice to influence the economic choices of their customers. Other examples of microeconomics include whether a family decides to spend more money on housing or food, or whether they have to make that decision at all. The conditions driving that decision, whether or nor wealth is an issue in that family, is a matter of microeconomic inquiry.