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Economics is the study of how society uses its limited resources. Economics is a social science that deals with the production, distribution, and consumption of goods and services. Economics focuses heavily on the four factors of production, which are land, labor, capital, and enterprise. These are the four ingredients that make up economic activity in our world today and can each be studied individually.
Economics is split into the following two broad categories of study:
- Macroeconomics - the branch of economics that studies the overall working of a national economy. It is more focused on the big picture and analyzing things such as growth, inflation, interest rates, unemployment, and taxes. When you hear the Federal Reserve is raising interest rates or that the national unemployment rate is 7.5%, you are hearing about macroeconomic topics.
- Microeconomics - the branch of economics that studies how households and businesses reach decisions about purchasing, savings, setting prices, competition in business, etc. It focuses at the individual level, while macroeconomics looks at the decisions that affect entire countries and society as a whole