This is my first post…if any body is reading out there please be patient… I have recently developed interest in macroeconomics with all the things going around in the world. So I started to review my basics to fully understand the basics of macroeconomics.
Macroeconomics deals with two fundamental problems
- Are people able to work, that is, are they able to get jobs : employment
- Are people able to buy things: Prices
These two problems are at the center of any situation in macro economics.
Adam smith in his book which was considered to be one of the first works of macroeconomics, has explained how if every one looks after the welfare of himself, there would not be much problem. The problem with this kind of thinking is that, if everyone looks after his own self interest there may be no market at all, even if there is market there will not be an equilibrium.
Until Great depression in 1920’s and 30’s people used to think the same. It took an event as the depression to change their minds. John Maynard Keynes was the one who prophesied that government should make necessary changes to skew the markets to go towards development.
Now back to the basics , Now the questions arise
- What is market?
- What is equilibrium?
- How can government intervene in the market?
- How does a market even form?
The answer to these question will be dealt with in the next post.
Until then chao….