ABSTRACT
In the previous chapter the relation between ‘micro’ and ‘macro’ was discussed providing that these terms are interpreted as ‘individual’ and ‘aggregate’, respectively. In chapter 1 I also introduced another possible interpretation of the terms ‘micro’ and ‘macro’ in economics. I have employed the terms general equilibrium analysis (GEA) and macroeconomics to capture this alternative use of the terms ‘micro’ and ‘macro’. In this view, GEA covers a particular conception of the economy in which the emphasis is on the determination of relative prices by the market and the allocation of a given quantity of resources over individuals. Yet, macroeconomics in its traditional form analyses the economy in terms of relations between some broad aggregates, focusing on the determination of the level of utilization of resources, especially output and employment. The present chapter provides the basis for a discussion of the way in which GEA and macroeconomics may be related.
