Putting The Mac Back In Macroeconomics

Via Kathy G, a 10-year-old article by Paul Krugman which does the best job I’ve ever seen of explaining the concepts of recessions, central banking, and liquidity traps, all using the example of a babysitting commune in D.C.

If you’re like me, you understand things like ‘recessions are when the economy is shrinking instead of growing’, but have no idea what causes them.  Believe it or not, this article really gives you a great sense of what causes people to stop spending money, shrinking the GDP.

As they say, read the whole thing.


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