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Economic Theory

            issues, you will understand and be able to evaluate the writer’s argument.
            When  you  hear  classmates,  co-workers,  or  political  candidates  talking
            about economics, you will be able to distinguish between common sense
            and nonsense. You will find new ways of thinking about current events

            and about personal and business decisions, as well as current events and
            politics. The study of economics does not dictate the answers, but it can

            illuminate the different choices.
                  Economics is concerned with the well-being of all people, including
            those with jobs and those without jobs, as well as those with high incomes
            and those with low incomes. Economics acknowledges that production of

            useful goods and services can create problems of environmental pollution.
            It  explores  the  question  of  how  investing  in  education  helps  to  develop
            workers’ skills. It probes questions like how to tell when big businesses or

            big labor unions are operating in a way that benefits society as a whole and
            when they are operating in a way that benefits their owners or members at
            the  expense  of  others.  It  looks  at  how  government  spending,  taxes,  and
            regulations affect decisions about production and consumption. It should

            be clear by now that economics covers a lot of ground. That ground can be
            divided  into  two  parts:  Microeconomics  focuses  on  the  actions  of
            individual  agents  within  the  economy,  like  households,  workers,  and

            businesses; Macroeconomics looks at the economy as a whole. It focuses
            on broad issues such as growth of production, the number of unemployed
            people, the inflationary increase in prices, government deficits, and levels
            of  exports  and  imports.  Microeconomics  and  macroeconomics  are  not

            separate  subjects,  but  rather  complementary  perspectives  on  the  overall
            subject of the economy.

                  To  understand  why  both  microeconomic  and  macroeconomic
            perspectives  are  useful,  consider  the  problem  of  studying  a  biological
            ecosystem like a lake. One person who sets out to study the lake  might
            focus  on  specific  topics:  certain  kinds  of  algae  or  plant  life;  the

            characteristics of particular fish or snails; or the trees surrounding the lake.
            Another person might take an overall view and instead consider the entire
            ecosystem of the lake from top to bottom; what eats what, how the system

            stays  in  a  rough  balance,  and  what  environmental  stresses  affect  this
            balance. Both approaches are useful, and both examine the same lake, but
            the viewpoints are different. In a similar way, both microeconomics and
            macroeconomics  study  the  same  economy,  but  each  has  a  different

            viewpoint. Whether you are looking at lakes or economics, the micro and
            the macro insights should blend with each other. In studying a lake, the

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