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Principles of macroeconomics
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The word economy comes from the Greek word for “one who manages a household.”
At first, this origin might seem peculiar. But, in fact, households and
economies have much in common.
A household faces many decisions. It must decide which members of the
household do which tasks and what each member gets in return: Who cooks dinner?
Who does the laundry? Who gets the extra dessert at dinner? Who gets to
choose what TV show to watch? In short, the household must allocate its scarce resources
among its various members, taking into account each member’s abilities,
efforts, and desires.
Like a household, a society faces many decisions. A society must decide what
jobs will be done and who will do them. It needs some people to grow food, other
people to make clothing, and still others to design computer software. Once society
has allocated people (as well as land, buildings, and machines) to various job