Microeconomics and Macroeconomics
Economics is today divided into two major subfields, microeconomics and macroeconomics. Adam Smith is usually considered the founder of microeconomics, the branch of economics which today is concerned with the behavior of individual entities such as markets, firms, and households. In the wealth of nations (1776), Smith considered how individual prices are set, studied the determination of prices of land, labor, and capital, and inquired into the strengths and weaknesses of the market mechanism. Most important, he identified the remarkable efficiency properties of markets and explained how the self-interest of individuals working through the competitive market can produce a societal economic benefit. Macroeconomics today has moved beyond the early concerns to include the study of monopoly, the role of international trade, finance, and many other vital subjects.
 |
| Image created by Author |
The other major branch of our subject is macroeconomics, which is concerned with the overall performance of the economy. Macroeconomics did not even exist in its modern form until 1936 when John Maynard Keynes published his revolutionary General Theory of Employment, Interest, and Money. At the time, England and the United States were still stuck in the Great Depression of the 1930s, with over one-quarter of the American labor force unemployed. In his new theory, Keynes developed an analysis of what causes business cycles, with alternating spells of high unemployment and high inflation.
Today, macroeconomics examines a wide variety of areas, such as how total investment and consumption are determined, how central banks manage money and interest rates, what causes international financial Crises, and why some nations grow rapidly while others stagnate. Although macroeconomics has progressed far since his first insights, the issues addressed by Keynes still define the study of macroeconomics today.
If you find this article useful then please comment below and let me know about it. Thank you for visiting this site.😊😊😊
Comments
Post a Comment