It is hard to think of a subject more connected with real-world events than economics. Tune into any television or radio news broadcast or look at the front page of any newspaper, and the chances are that economics is either being reported or analysed. Stories about inflation, unemployment, recession and poverty make headlines.
As you begin to study the subject, you will come to appreciate that economic theory and practice are closely interconnected. For example, take the challenge of ensuring low and stable prices. Every government sets itself the objective of having a low rate of inflation. However, the means by which this objective is met — macroeconomic policy — changes with the times. For example, in the 1970s, a prices and incomes policy was seen as the best method of controlling inflation by using the law to limit price and wage increases. In more recent times, managing the level of total planned spending in the economy (aggregate demand) is the preferred method of government policy. Prices and incomes policies have been seen to fail and have fallen out of fashion.
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