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Economics is the study of the method by which resources are utilized by people and allocates the resources for meeting their requirements, which are unlimited. It deals with the production, distribution and consumption of goods and services. The main topics which are covered by economics include land, and investments, of money, income, and production, and of taxes and government expenditures.
Two main divisions of economics are macroeconomics and microeconomics. In microeconomics, the study of individual consumers is focused and in macroeconomics, the study of aggregate behaviour of the economy is discussed. In microeconomics, the basic demand and supply theories are discussed. The price and output determination of individual markets are discussed here. It is also discussed the method of deciding the quantity of production by the individual businesses and the charges for it. The decision making process of firms and individual consumers are understood in this branch of economics. In macroeconomics, national economy as a whole is discussed and an aggregate picture is given here. Some of the factors, which are studied in macroeconomics are national income, inflation, unemployment, and industrial production which are aimed at examining the government policy effects on these variables. The other topics covered here are monetary and fiscal policies, economic growth and consumption and investment determination levels.
The two main approaches in economics are the classical approach and the Keynesian approach. According to the classical economists, well functioning of the markets is assumed. The markets are assumed to react fast to any equilibrium changes through the self-adjustment mechanisms in the economy. The main assumption here is the self-regulation of the economy. Flexible wages, prices and interest rates are assumed in the classical economics. According to the Keynesian economists, the reaction of markets to equilibrium changes is very slow. Moreover, it is assumed that the intervention of government is needed for getting the economy into equilibrium.
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