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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: