Overview: Economic Catastrophes

StartTable of ContentsIndex

Reading Selections:

On The Internet:

Optional Section:

* Past Sense
Who's Who

Since the 1930s economists have split their domain into two parts, into microeconomics and macroeconomics. The difference between microeconomics and macroeconomics is in the problems with which each is concerned. Microeconomics focuses on the "What?" and "For Whom?" questions. It examines how a society decides to produce the bundle of goods and services it does (the "what" question), and who gets these goods and services (the "for whom" question). It explores how various systems of incentives and ways of making decisions (such as "dollar voting" or various forms of political voting) work to solve the "what" and "for whom" questions. Central in much of this examination is the concept of economic efficiency. Microeconomics asks whether the bundle that a society produces is the bundle that has the highest value to that society, and if it does not, what changes would increase that value.

Macroeconomics deals with topics of inflation and unemployment. This selection of readings introduces you to macroeconomics by looking at extreme episodes, the hyperinflation in Germany after the First World War, and the massive unemployment in the United States during the 1930s. It also describes how the methods used in macroeconomics differ from those used in microeconomics.

After you complete this unit, you should be able to:

  • Explain how microeconomics differs from macroeconomics in topics and in the way it simplifies its theory.
  • Define what a recession is.
  • Explain what a hyperinflation is, and how people change behavior in order to cope with it.
  • Explain who gains and who loses from inflation or deflation.
  • Explain what is meant by partial equilibrium analysis.
  • Sketch what happened to production, unemployment, and prices during the Great Depression.
Copyright Robert Schenk