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Keynesian economics is an economic theory based on the ideas of John Maynard Keynes (Jackson 29). First published in 1936, Keynes's theory suggests that general trends may overwhelm the micro-level behavior of individuals. He stated," This book is chiefly addressed to my fellow economists ... I myself held with conviction for many years the theories which I now attack, and I am not, I think, ignorant of their strong points" (Keynes). Keynes asserted the importance of the aggregate demand for goods as the driving factor, especially in downturns. From this he argued that government policies could be used to promote demand at a macro level, to fight high unemployment and deflation of the sort seen during the 1930s. Keynes thought that the economy was the most important issue of the time as evidenced by his statement, "The ideas of economists . . . are more powerful than is commonly understood.…… [Read More]
economics is derived from "oikonomikos," which means to be skilled in household management. Although the root word is very old, the discipline of economics as we understand it today is a relatively recent development. Modern economic theories emerged in the 17th and 18th centuries as the western world began its transformation from an agrarian to an industrial society. Despite the enormous differences between then and now, the economic problems with which society struggles remain the same. How does a nation balance the available resources with the demand on a regional, national, and now global scale in order to produce high levels of employment, and create real and lasting wealth which benefits her citizens? What is the motivating factor for workers to engage the economic struggle of building wealth? How does a nation provide, create and maintain a rising standard of living for ourselves and future generations?
Progress in economic thought…… [Read More]
There are many potential actions that could have been taken to help prevent the closing of GM and the job losses, plant closings, and economic catastrophe that is likely to occur as the once unstoppable giant collapses (Wolff, 2009).
The UAW won above subsistence level wages for GM employees, which should have theoretically had the same effect as an economic stimulus in the traditional Keynesian sense. However, rather than being rewarded with increased demand, GM workers found themselves displaced when the company decided to move production to countries where the workers did not attempt to cut into company profits by demanding fair wages. The company profited and these changes had little affect on demand. The world still demanded GM cars, regardless of where they were produced.
The impact of displaced workers should have created the affect of decreased demand according to both Keynesian and Marxian economics. However, when one takes…… [Read More]
Keynesian evolution: Analysis and Criticism believe myself to be writing a book on economic theory which will largely revolutionize -- not, I suppose, at once, but in the course of the next ten years -- the way the world thinks about economic problems"
John Maynard (Keynes, Letter to G.B. Shaw, January 1, 1935)
Prior to the Keynesian evolution, may economists and politicians viewed economics from a "micro" perspective. They saw factors such as unemployment, interest rates, profit and loss as related to individual organizations and the impact of individual transactions. In modern times, the idea of macroeconomics is much more widespread, and the impact of economic endeavors is viewed as part of an economic whole, or national/global approach. Part of the credit for this much more diverse and broad view is due to the efforts of John Maynard Keynes, through his publications and the "Keynesian evolution."
Though Keynes is often…… [Read More]
John Keynes is one of the most influential economists largely due to his theory of Keynesian economics, which dealt with his modern macro-economic policies (Skorburg, 2009). His work is linked to the Great Depression, partly because he advocated public and governmental spending to base national economies on. His most celebrated piece of literature is General Theory.
Adam Smith is the quintessential Age of Enlightenment economist who published Wealth of Nations in 1776, which posited the viewpoint that free enterprise and laissez faire policies would benefit the free market system.
People wouldn't ordinarily link Karl Marx to a free market system since he advocated the exact opposite of that, a form of communism that results in socialism, but his Communist Manifesto -- which presaged the ussian evolution -- inspired many free market communists to oppose his ideas.
Friedrich Von Hayek's theories, which are included in oad to Serfdom, his…… [Read More]
Increases in manufacturing reveal benefits early, one can track the benefit at all stages and report the benefits to the public quickly. According to a statement released by the Center for American Progress, "solar panels don't install themselves. Wind turbines don't manufacture themselves. Homes and buildings don't retrofit or weatherize themselves. In our industrial society, trees don't even PLANT themselves, anymore. eal people must do all of that work." The public wants a quick fix, they want to start hearing that the economy is doing better and a focus on manufacturing will accomplish this. Additionally, there has been increasing pressure on the White House to focuses on alternative energy sources. Such a policy would gain favor with democratic and liberal environmentalists.
4. Do you consider your views to be more aligned with a classical or Keynesian approach to economic thinking? Explain. (There is no right or wrong answer). See module…… [Read More]
For the period of the late 1960s and early 1970s, West Germany strived to assist the dollar. The United States and many other nations pushed West Germany to reassess so as to make up for the dollar excess. (Germany in the World Economy)
At last, after escalating waves of conjectures, the retton Woods system had a collapse in August 1971. All through the post-retton Woods period, the deutsche mark stayed under pressure. In order to relieve strain within Europe, West Germany and other European states assented to peg their currencies to a special system of comparatively narrow exchange rate bands officially named the 'European narrow-margins agreement' but unofficially identified as the 'snake'. The United States and West Germany performed main roles in attempting to organize a new global monetary system. but, in spite of its willingness to make small exchange-rate alterations for the benefit of new currency arrangements, West Germany…… [Read More]
Keynesian Aggregate Expenditure Model
Company profits grew strongly in the June quarter putting another question mark over the extent of the predicted economic slowdown..."
However the central bank acknowledged that the weaker data for capital spending intentions are at this point the only clear evidence of an impending slowdown"
These two quotations regarding the same economic scenario seem to pose the question to consumers and economists alike -- why a predicted economic slowdown, if company profits are growing strongly? hy place so much fear in the data regarding capital spending intentions on the part of consumers? hy turn to the tools macroeconomics has long focused on, that of monetary policy, which the central bank controls, and fiscal policy, which the federal government controls, to shift the current state of economic equilibrium, as described above? (Schenk, 1997, "Synthesis")
The answer lies in the Keynesian aggregate expenditure model. This model…… [Read More]
disrupting America's economic system is a fundamental objective of terrorists
Even as the world continues to struggle with the terrible shock from the September 11 attacks in New York and Washington, one principle lesson has already become clear: disrupting our economic system is a fundamental objective of terrorists.
Prior to September 11, our economic environment was certainly not immune to terror, in comparison to many other nations; we lived relatively terror-free. Now, however, the aftermath of the terrorist attacks serves as a grim reminder that international relations and security developments can dramatically affect economic performance.
US History is replete with countless examples when macro fundamentals are overtaken by what economists refer to as, exogenous shocks -- surprise events that can profoundly and often unpredictably shift political and economic resources, and send even the most accurate forecasts astray. Commodity shocks, such as the two OPEC jolts in the 1970s, are classic…… [Read More]
Balanced Federal Budgets
The federal government has a wide variety of responsibilities, most of which stem from programs that the government has created. Some of these outlays are discretionary, but many are not. The trade-offs for the federal government are usually not a question economics, but politics. The current federal budget for FY2016 shows a deficit of $474 billion. The largest outlays are for social security ($891 billion), other mandatory programs ($627), defense ($589), Medicare ($529) and non-defense discretionary, which covers a wide variety of different programs. Finding $474 billion to cut there -- or some of that money in conjunction with tax increases -- is inevitably going to be a challenge. Much of government spending in the budget is in the form of mandatory programs. Further, many of these are impossible, politically, to reduce. One does not simply cut Medicare payouts without losing a strong voting bloc, for example.…… [Read More]
There is a belief, common to economists, that government intervention is necessary to assist economic growth. The current belief that the reason that the economy is faltering is that job growth has faltered, has not altered this perception, even though it probably should have. Recently both the Bush and Obama administrations have tried many different means of stimulating the economy (much as Franklin Delano Roosevelt did during the "Great Depression"), and these means have had varying levels if success. However, despite some small amount of relief and a stronger stock market, job growth remains stagnant and the economy slugs along with it. The efforts of the current administration toward job growth and creation, whether that be in State of the Union speeches or actually policies, have not produced the desired effects. hy is this? Could it be that the Keynesian methods of economic growth and job production are faulty?…… [Read More]
Economics: Neoclassical, Keynesian, And Marxian Theories
Social theories attempt to explain how people interact with each other, and with their surroundings. For this reason, it is believed that social theories shape society, so much so that people will theorize elements in their surroundings based on their life situations and what they experience in their interactions. Towards this end, what one person thinks or believes about a certain aspect may not necessarily be what another person thinks; people hold different theories about how the economy works, and how it influences human interactions - and this is particularly why we have multiple economic theories today. Social theories are broadly categorized into three -- humanism, structuralism, and dialectics. These three have been applied to economic theory to explain how the various elements of the economy interact to realize maximum outcomes. This text demonstrates how the aforementioned social theories have been used to shape…… [Read More]
4. The role that the FDA plays in setting food safety requirements is inherently costly to the economy. The function is not based on economic concerns but rather public health concerns -- the FDA's mandate dates to Congressional concern about the Elixir sulfanilamide disaster and traces its roots to Upton Sinclair's The Jungle, which documented meat production in Chicago at the turn of the 20th century (FDA.gov, 2009). Thus, decisions about FDA regulations are not made on the basis of economic good, but rather public good. Increased regulations would impose increased costs on business. In classical economics, these costs would act as a form of tax, increasing risk and discouraging investment. Eliminating these requirements would lower these costs, which would allow for an expansion of the food business. It could be argued that the threat of litigation today would counterbalance the need for regulations, but that claim has not been…… [Read More]
Economic Events: 1980-1989
the decade of greed. The era of onald eagan when the rich got richer and the poor got poorer. Despite this common wisdom, 1980 started off auspiciously. On May 8, 1980 the World Health Organization hailed "one of the century's greatest medical accomplishments," the final and total eradication of smallpox (Dickson 247). But how quickly times change - barely a quarter century has passed and this same disease is making headlines once again.
Attitudes change also. While many in this day and age would still agree that the 1980's was a selfish period in American history, a sea-change has occurred in the rhetoric issuing forth from Washington D.C. In a very fundamental way, party politics has been thrust aside as concerns for homeland security take precedence over petty partisanship. Michael Barone notes this in his analysis of a speech made by Democrat ichard Gephardt in the Summer…… [Read More]
Thus, a region or nation experiencing economic depression will be unable to use the interest rate lever to boost the economy. Similarly a country with high inflation will be unable to independently raise interest rates to contain inflation. Moreover, Islamic countries, which form a large part of the geography, do not believe in interest rates.
Political barriers -- Political differences between nations make it extremely difficult for them to adopt a common currency. It can lead to a loss in political sovereignty as monetary interests would need to surpass political interests. This is unlikely to be acceptable to most of the nations and the idea of a single currency may be difficult to implement (Gimp, 2008).
Will Pros and Cons change Over Time? Depending On the Country?
The economic conditions to determine a monetary union depend on: the openness and size of the economy involved to trade; the free movements…… [Read More]
There are a number of different metrics that can help to measure the health of an economy. The GDP is one of those numbers, and can be obtained from the Bureau of Economic Analysis. Following a decline of 2.6% in 2009, the GDP grew in 2010 by 2.9%. GDP rates fluctuated by quarter, with a low of 1.7% in Q2 following by escalating growth in the last two quarters. This represents a slow recovery from the steep declines of 2008-2009. Another measure of economic health is unemployment. The current unemployment rate from the Bureau of Labor Statistics is 9.0%, a decline of 0.4 percentage points from December. This rate is historically high, it is lower than at any point in the past year, again showing a sign of slow recovery. A third measure of economic health can be found in the inflation rate. The best measure of inflation is…… [Read More]
hile the U.S. is only showing the first signs of recovery from the global economic crisis, other nations such as Australia and China have recovered much more quickly. There are a number of factors that have contributed to the disparity in economic performance in the past three years in these different nations. In particular, three factors will be considered. The first is the situation in each country at the outset of the crisis. As the crisis was largely precipitated by a credit crunch, the differences between the structure and regulation of the banking sectors in each country will be given particular attention. The second factor will be the response on the part of each federal government to the crisis. The third factor will be the nature of the different economies -- the degree to which different structures have impacted the recovery process. Lastly, policy implications will be drawn for…… [Read More]
Fiscal and Monetary Issues in America
There are high tensions in the American economy today resulting from speculations whether the government will be able to hit the debt ceiling. Failure to hit the debt ceiling has serious economic effects to many sectors of the economy both in the United States and various countries of the world. Political disagreements regarding the budget delay decision-making process as the date ceiling draws closer each day. The government debt will cause disruption and failures in the U.S. market system and beyond because some rates will double while others will completely fall. The consequences of these are both the government and private sector failures and the economy will not be in a position to sustain itself. Government securities will lose market value and the cost of bonds will double because of the risk premiums. The result of this is government deficits, which will require…… [Read More]
here are variations on these four schools but, in essence, these four schools dominate the field. hese four schools are: Marxist, Kenyesian, Monetarist, and neoclassic.
he Marxist school is built upon the theories and writings of Karl Marx and Friedrich Engels. hese gentlemen believed that all economic societies go through a period of development wherein different economy systems are used beginning with a form of primitive communism through feudalism, capitalism, and then eventually ending in pure communism. he economy of the Soviet Union was based on the theories of Marx and Engels and, as a result of the failure of that government it has fallen out of favor among modern day economists.
he decline of Marxism seemed to served as an impetus for the remaining major economic schools to re-examine their positions. In the last two decades of the twentieth century the schools began to build a consensus. his consensus…… [Read More]
POSITIVE AND NOMATIVE ECONOMICS ELATES TO THE U.S. GOVENMENT
The objective to the success of a specific science is the capability to identify and delineate opinions on 'what is' from 'what ought to happen'. This includes providing a demarcation between positive statements and normative statements. Positive statements deal with 'what is, was or what will be' but the normative statements deals with 'what ought to be' and are based on value judgments regarding what is good or what is bad. The positive conclusions could be considered as those which are extensively applicable throughout the whole world and they are testable whereas the normative instructions are not testable but constitute the basis for formulation of positive statements. Positive statements are for example, when we ask economists to inform us regarding how the price system operates, we are asking them to travel us along the road of positive economics. The following statement…… [Read More]
George Magnus is a leading Economic Advisor at the UBS Investment Bank and has been a rebel around different systems in the world. George was employed in the UBS investment bank from 2004 till 2012. Along with being the senior economic advisor, he also played the highest level economist from 1997 till 2004. Prior to working for the UBS, he was working as a chief economist in SG Warburg from 1987 till 1995. Magnus is known for his work and cooperation with famous banks of both America and United Kingdom. The economist has authored many books and uploaded regular reviews which can be found at his website. George Magnus did his Masters in economics from the School of Oriental and African Studies from the University of London. He is also known for teaching the subject at the University of Illinois and University of Westminster.
The way he put out his…… [Read More]
Japan was once on a stellar track to economic prosperity. The end of the twentieth century saw promising chances for the island nation's economy. In 1991, the government spending was one of the lowest the Organization for Economic Co-operation and Development (OCED) and 31.6% of the nation's GDP (Utt 2008). That same year, Japan's national income was at 86% of the U.S. gross national per capita income, a big improvement from just 20 years ago when the nation was only making 66% of the U.S. per capita income. This was an impressive feat for the nation to embark on. Yet, this was to change in the following years dramatically. During the later decade of the 1990s, the Japanese government took on the practice of vastly increasing government spending as a way to stimulate an economy that was beginning to lag. As the growth of the economy began to go stale,…… [Read More]
macroeconomic themes that have been taught or covered in this course is economic policy and its role in determining or influencing economic growth and development. Economic policy is a subject that has attracted considerable attention in recent months because of the presidential elections in the United States. Actually, monetary policy was one of the major issues in recent presidential campaigns and elections. This issue has also been subject of several publications by different new sources because of its significance in the country's economic growth and development. Paula Dwyer wrote an article to examine the recent rise of the Dow Jones Industrial Average in the aftermath of Donald Trump's election as the U.S. President. This analysis was carried out on the premise of the impact of Trump's economic policies on different aspects of the economy. The U.S. market has shown indication of its approval of Trump's economic policies in different ways…… [Read More]
In classical though, hoarding (beyond the short-term) would always be balanced by dishoarding, in which people were accumulating inventory. However, Keynesian economics acknowledges that there are different decision makers in the hoarding and dishoarding process, so that it is unlikely that hoarding and dishoarding will always remain in equilibrium. Classical theorists suggest that financial markets and interest rates can help balance hoarding and dishoarding, but this is generally seen to occur with a recession, not in a manner that can prevent a recession. The Keynesian approach to this is to stimulate demand for products. The theory is that the increase for demand in a single product leads to increased (or maintained) production, which leads to increased (or maintained) employment, which increases the demand for other products. Obviously, demand is the driving factor in Keynesian economics rather while supply is the driving factor in Say's Law.
Many people may wonder if…… [Read More]
Economic Platform of Bernie Sanders
Bernie Sanders' economic platform is based on the concept of income inequality. As a socialist liberal, his main thesis is that the U.S. economy is producing wealth, but, at the same time, a large income inequality. His platform explores an interesting dichotomy, namely the fact that, despite the continuous increase in economic productivity over the years and despite the tremendous advances in technology, which should theoretically balance a reducing of economic disparities, workers have to work longer hours for the same or lower wages.
Sanders's approach is more complex than just emphasizing economic disparities. He is interested in building his platform around a transfer of wealth, not only on wealth disparities, between the middle class and the rich and very rich classes. As all know, the U.S. was built around the proliferation of a rich middle class, so this transfer should be of…… [Read More]
What "current macroeconomic situation" U.S. (e.g. U.S. economy concerned unemployment, inflation, recession,)? What fiscal policies monetary policies time? Key concepts include paper -- data trends unemployment, inflation, GDP growth, expansionary fiscal policy tools, FOMC, easy money policy tools terms class.
What is the current macroeconomic situation in the U.S.
The United States is no longer mired in a full-blown recession as it was in 2008, but the process of economic recovery has been long, slow, and onerous. At present, unemployment is hovering around 7.9%. This reflects a slight increase from the last quarter. The U.S. seems to be in a precarious position, neither in full-blown recessionary mode but not entirely recovered. Of particular concern is the fact that "the increase [in unemployment] was much sharper for millennials, up from 11.5% the month before and 10.9% in November 2012" (Kingkade 2013). Young people were particularly hard-hit by the recession.…… [Read More]
(Major Schools of Economic Thought) This theory was born from the crucible of a Great Depression and a orld ar. Chicago theorists vehemently disagreed. They made the argument that the wealth of nation's increase when the market is allowed to naturally price goods and services. Spending would unnaturally change the prices of these goods, thus changing the reaction of the market to the goods, causing a misallocation of wealth or goods.
According to the Chicago theorists, the role of a government was to make sure individual rights were not trodden upon during market interactions and to mitigate the damage of neighborhood effects. Neighborhood effects are defined by Milton Friedman, the godfather of Chicago Economists, as when, "the action of one individual imposes significant costs on other individuals for which it is not feasible to make him compensate them or yields significant gains to them for which it is not feasible…… [Read More]
Economic forecasting refers to the process of trying to predict the future state of the economy through a series of different indicators. This process helps to understand the probable future of a nation’s economy and for policymaking to help promote economic growth. When developing an economic forecast, various macroeconomic factors/conditions are taken into consideration. This paper provides an economic forecast of the U.S. economy based on recent economic indicators in 2017 and 2018.
Based on seasonally adjusted annual rates in the fourth quarter of 2017, the gross domestic product growth rate is expected to increase moderately in the first quarter of 2018. As shown in these indicators and based on recent macroeconomic conditions, GDP growth rate in the first quarter of this year is expected to be approximately 2.8%. Additionally, GDP growth rate will continue to increase moderately in the second half of the year to exceed 3.0%.
In…… [Read More]
In other words, these companies expand their business, reach a peak in their business activity, and then go through a period of recession, followed by a period of business expansion, and so on.
It is important that companies understand that the economic sector they represent follows the same business cycle. Therefore, it is difficult for companies to expand their business during periods of recession in the economic sector they represent. But they can expand their business during recession periods of other business sectors, represented by products from indirect competition. This situation can be observed in McDonald's situation.
This can be an explanation of the fact that the company's sales have significantly increased during the crisis. The incomes of most people have been reduced, which means that their purchasing behavior has modified. In such cases, people usually spend less. This means that they purchase less, or they purchase cheaper products. In…… [Read More]
As banks faltered and default rates rose, rates of consumption and demand plummeted. Unemployment began to increase, and in a predictable Keynesian fashion, as individuals grew more insecure about their job prospects they began to spend less money. The United States has a particularly consumer-driven economy -- Americans are known for having historically low rates of savings and to engage in high rates of spending -- so this was particularly disruptive to the usual rhythms of the economy.
Young people graduating from college suffered some of the worst effects of the recession. "Unemployment rates for individuals younger than 25 are currently 21% in the euro area and 19% in the U.S." (Branchflower 2010). They were competing with older, more experienced workers who had recently lost their jobs. The fear is that today's low starting salaries create a class of permanently low-earning graduates, many of whom have high levels of college…… [Read More]
The article concedes, however, that declining business confidence is an absolute danger that must be dealt with and the government not being an active partner with businesses and in favor of the recovery will just make things worse (Pollin, 2010).
A similar point is made in a different article that states that the role of fiscal policy in pushing an economy towards recovery cannot be over-estimated or over-analyzed because of the vital role fiscal policy plays in said recovery. The article notes that the impact (or lack thereof) of programs like Temporary Assistance to Needy Families (TANF), Medicare, tax credits, Social Security, direct subsidies, unemployment insurance and such are often included in any analysis of fiscal policy but it also noted that many parties that look at this topic glaringly omit are transfer payments and other assistance paid directly to financial institutions (Tcherneva, 2012).
This perhaps became a much less…… [Read More]
Private Sector Investment and Economic Development
Investment and economic development
The ole of Private Sector investment in Economic Development
In the past few decades there has been overwhelming support for growth and development rooted in private investments and market-oriented strategies. A move from public sector driven growth has come as result of the need to reduce the widening gap in the balance of payment account, increasing public debt, rising inflation rate, growing foreign debt fundamentally falling living standards. There has been a shift from the need for large public corporations undertaking productive activities in an economy owing to the realized inefficiency in resource allocation. Corruption and misappropriation of public funds is observable owing to the lacking need to optimally reap benefit from the investment. Unlike in the public sector, private sector investment guarantees optimal productive activities, efficient allocation of productive resource, technological advancements to reduce cost and increase productivity (Dao,…… [Read More]
The Federal Reserve System is mandated with contributing to the management of all three of these measures. The role of the Federal Reserve is to control money supply, something it does via the setting interest rates and through open market operations. The Federal Reserve works independent of the White House, although there may be consultations to ensure a match between fiscal and monetary policy.
One concept that heavily influences both monetary policy and fiscal policy is incrementalism. This is the idea that future actions will be built on past actions. There will be no sudden moves in either form of policy, and seldom are programs and spending levels subject to considerable scrutiny -- most changes are therefore incremental. This allows policymakers to avoid major shocks. The process by which fiscal policy is set revolves around the budget. The Office of Management and Budget spends 16-18 months preparing the budgets based…… [Read More]
This is exactly the case with the European Union; a European-Union-Member-State that fails to pay on its public arrears will cause weakening of capital amidst its financers. The danger that this financial catastrophe will extend towards the remaining Euro-Area would position the ECB under immense stress to help and rescue the dissolute Member-State, despite the fact that this move may undermine Euro-Area value in the progression (Eichengreen and Wyplosz, 1998). As long as private agents consider that ECB would give way to this stress and as long as Member States keep the right to act in a dissolute way, the central bank will eventually require reliability. Once more, most of this reasoning is also relevant to numerous supply-side procedures; for instance, the viewpoint of inflationary earnings settlements. Salaries negotiating that drive the curve externally will, perhaps, produce pressures for the central bank to assist the ensuing inflation to keep away…… [Read More]
he intersection determines the amount of investment in education / productivity factors by all individuals and institutions.
he major criticisms to the Neoclassical model come from the assumption competition holds, namely that individuals act to maximize profit in all scenarios; factor mobility is unlimited; marginal returns to labor don't increase with wage rates, and other simplifications which rarely hold true in the workforce. Nor are all workers the same to the firm (discrimination), and workers' productivity and labor supply decisions change at different wage levels. hen we have to consider frictional unemployment; information asymmetry; product substitution; any number of real constraints that complicate the pure "Marginal Demand for Labor" theory (Kaufman & Hotchkiss, 2000, p. 31).
he main counter to the Neoclassicals arose in the early-mid-20th century Institutional school after Veblen, Commons and Mitchell, ironically at the University of Wisconsin 1920-30. Institutionalist focus on real evidence counters the Neoclassical theory…… [Read More]
Romer explicitly and directly ties the changes that have been made to the model to the historical shifts in the world's (and the United State's) economy; by noting that inflation was simply not a major issue for the first decades of the models' use and existence, the model's efficiency and accuracy during that period are easily explained. Just so are the inefficiencies of the model in a world where inflation is a major factor in the global economy (as well as in the economies of many independent nations), which the inclusion of aggregate supply (AS) into most contemporary uses of the model addresses. This also creates complications in the model that are not necessarily warranted by the increased accuracies that they provide, and it is for this reason that Romer advocates another major change to the model before it is put to further use.
It is at his juncture that…… [Read More]
For most of the time since the subject of economics was first studied, the idea of resource constraints has been irrelevant. The world was simply not viewed as a finite place. The concept of resource constraints was limited, more or less, to the consideration of constraints on an individual economy. Adam Smith recognized that all economies would face resource constraints of one type or another. As Snowdon (2003) points out, "to Smith, it was obvious that all economies were faced with resource constraints and that free trade was a policy that would allow any nation to achieve the most efficient allocation of its scarce resources." This notion was built into the Ricardian trade theory and classical economics. It has not been until recent times, however, that the concept of worldwide scarcity has become relevant. The idea of peak oil and a world with seven billion people (or more) has…… [Read More]
ules and Institutions of the Bretton Woods System
The increasing popularity of the importance of monetary unions has gained much focus in the recent past. Most states consider forming monetary unions a solution to most of their financial problems. However, they fail to realize the challenges associated with its establishment and sustainability. Therefore, this research paper analyzes two different monetary unions, their policies, failures and successes and lessons learnt from their experiences for future success of the monetary unions.
The key design features of the System
The system was designed with the fundamental aim of establishing an international financial system to overcome the real and perceived financial problems. Among the problems included the competitive devaluation, subordination of the monetary policy in relation to the external bane and the need for the establishment of a system that facilitated exchange rates for different foreign transactions (Eichengreen, 2004). The design of the system…… [Read More]
To ensure that none of this was taking place, many state regulatory commissions would set prices and monitor the industry. Then, during the 1980's is when deregulation would occur, as many economists felt that they were stifling economic growth. As a result, the different laws were changed, allowing for electric producers to have greater freedoms in: setting prices and determining how it would be distributed. With a host of electric companies, beginning to own others producers in different states and they began to actively trade it. This is important, because it shows how the overall level of government regulation would be reduced. Yet, the various state regulatory commissions would still be able to maintain oversight and control inside their borders. As a result, there was a reduction in the overall amount of regulations, while allowing certain controls to remain in place. When you put these different elements together, this meant…… [Read More]
Local Economic Development Initiatives
THE IMPACT OF LOCAL ECONOMIC DEVELOPMENT
The Concept of Sustainable ural Communities in Local Areas
The Concept of ural Development in Local Areas
The Concept of Endogenous Development Initiatives in Local areas
Transformation is key when it comes to local economic development initiatives. Ever since World War II economies in so many different rural areas have been faced with the rising harsh economic circumstances that have been threatening people's everyday existence. A lot of the situations that they are going through have a lot to do with depopulation resulting for the most part from low growth in job opportunities, out-migration, an aging population, underemployment rate, high unemployment and low family income, lack of socio-economic infrastructure ( shopping centers, health centers, schools, power and electric supply water supply,). esearch show that the rural economy in both developed and developing nations countries has also gone through a big…… [Read More]
Therefore, this model is focusing on how an increase in labor productivity will lead to involuntary unemployment. The below chart is highlighting how this is occurring. (Fazzari)
The Radical Keynesian model thinks that output increases from higher levels of productivity. This is because demand is constrained and firms have to see an improvement in sales. However, they do not think that falling prices will restore full demand. This is because these declines will help them believe that prices will fall even further in the future (which restrains spending). This causes bankruptcies to increase and it is eroding the wealth of borrowers. These issues are forcing aggregate demand to remain the same instead of shifting outward. (Fazzari)
Since wages and prices are flat, they do not help to improve unemployment or output. This is from aggregate demand remaining the sluggish (which is making wages and price adjustments stagnant). In the future,…… [Read More]
The increases in the deficit; are a normal effect and will equalize itself out through an improvement in the total amounts of taxes that are collected. (Schiller, 2010)
For me, these insights are providing greater clarity about what actions must be taken to avert recessions. It is also illustrating how the headlines in the news media about government policies may not be completely accurate (i.e. The problems with the national debt). Instead, this is illustrating how these changes are a necessary outcome. That will help to stabilize the economy and prevent recessions from becoming worse. This is the key for avoiding downward spirals in economic activity and the negative long-term effects it will have on everyone's standard of living. (Schiller, 2010)
What has been happening to consumer confidence over the last six months? What explanation for consumer confidence does the memo give?
In the last six months, consumer confidence has…… [Read More]
This suggests that fine-tuning the model may be required in order to identify optimal approaches. For instance, Gionnani and oodford add that, "It is only if we ask whether the same policy continues to be optimal when we vary the statistical properties of the disturbances that we can hope to find an advantage of one representation of the policy rule over the other (1427).
Gionnani points out that rather than restricting the analysis to the Taylor rules component of the new Keynesian model, an optimal model should determine a robust optimal monetary policy rule within a larger family of rules that is sufficiently flexible to implement the optimal plan in those cases where the parameters are known with certainty. A study by Leeper reports that optimal monetary policy behavior in the simplest forward-looking version of the popular class of dynamic stochastic general equilibrium models with nominal rigidities. oodford (2003) exhaustively…… [Read More]
Keynes's policy ideas so difficult to accept in the 1930s?
This is a paper that analyzes the above questions and answers it by identifying the factors that were responsible for the rejection of Keynes ideas during the 1930s. It has 12 sources.
It is quite usual that people do not readily accept changes in their lives easily. A change in routine and economic patterns would certainly disrupt people's lives, which they would certainly not great warmly. This is because of the fact that it would mean readjusting themselves to almost everything that they do.
A change in economic relationships too would mean that virtually everything in society would change. This is because of the fact that nearly everything in society is economic based (Begg, 2000).
When there were problems visible in society, Keynes formulated economic policies that he believed would solve economic crises if a country adopted them. However, this…… [Read More]
The concept of the multiplier effect is closely related to the concept of marginal propensity to spend and consume. Marginal propensity can be understood as the increase in personal consumer consumption and saving that occurs with an increase in disposable income. When fiscal policy creates more disposable income for a family, the concept of marginal propensity predicts how much more they would be save and spend. Thus marginal propensity predicts the actual impact of fiscal policy when it is enacted and thus it can calculate the multiplier effect.
Prepare an essay describing Keynesian economic theory. Be sure to fully explain what is being critiqued and why. You should also be clear on why you find this particular critique so compelling. (600 words).
Keynesian economic was developed in the 20th century by the British economist John Keynes. Keynesian economics is basically a reinvention of classical economic theory, it focuses upon a…… [Read More]
The general policy goal vis-a-vis inflation is to have growth in inflation over time but it should be a slow and steady rise with little to no falling at any point.
The 11th chapter is about aggregate supply and demand curves. Macroeconmics is described as a "bird's eye view" of the economy. The book then talks about stability or lack thereof and then discusses the self-adjustments, flexible prices and flexible wages of the classical theory. The book then talks about Say's Law, which is that "supply creates its own demand." The advent of Keynesian economics in the 1930's is then discussed, as this was clearly in response to the economic travails of the late 1920's and 1930's (and even the early 1940s') Keynes, unlike classical economists, said that there was no self-adjustment and that government could and should make investments to kick-start the economy.
The book then talks…… [Read More]
Stimulus Bill Political Communication
Political Communication during the Stimulus Bill Debate
In times of economic uncertainty and national emergency, the government has the capacity to make decisions that it believes will aid the country in its time of need. Such a time of need occurred in 2009 when the country continued to face an existence of dire economic circumstances involving national cash-flow and jobs. In order to set economic recovery into motion, President Obama called for the passing of the American ecovery and einvestment Act of 2009 (AA), otherwise regarded as the stimulus bill. While such a bill was considered pivotal by many government officials in order to get the country back on its feet, crucial differences in policy and bill structure could be viewed in assessing the opinions Democrats and epublicans brought to the floor in terms of the bill's passing. In understanding the basis of the bill itself,…… [Read More]
The war had broken the economic back of Europe, as well as its political and transport structures. Another key aspect of later Keynesian theory was the need for maintaining economic infrastructures, rather than breaking them in revenge, and that cash infusions in the short run reap dividends for all in the long run. Keynes always took a long-term rather than a short-term view of economic policies. The current policies against Germany only satisfied short-term emotions, but could cause long-term economic destruction of a major power and thus injure the world. "It was only at a later stage that a general popular demand for an indemnity, covering the full costs of the war, made it politically desirable to practice dishonesty and to try to discover in the written word what was not there."
However, Keynes' perspicuous view of world events also showed that he did not merely focus on the immediate…… [Read More]
The events led to a situation in which the power was distributed between the people and the governmental structures in the meaning that the federal decisions were continually subjected to pressures. The government gradually lost its powers and the direct result was that of increasing levels of uncertainty within the societies. Uncertainty as such came to be a constant of the general life as well as the specific life of the economical and political fields. And this new element -- or at least newly identified element -- could not be neglected. In Keynes's words, uncertainty is recognized as the "inescapable companion to the human condition" (Keynes, 2006).
Aside the realization of uncertainty, Keynes's interest in the element has also opened the doors to the identification of the means in which to best address uncertainty in such a manner that it is managed and it generates a limited negative impact upon…… [Read More]
2009 timulus Package. The stimulus was $787 billion. The questions: What is the breakdown of spending allocated by state? Where did the money go?
The 2009 timulus Package
The American Recovery and Reinvestment Act of 2009, (ARRA) otherwise known as the timulus package was signed in 2009 by Obama as reaction to the recession and designed to create jobs as soon as possible and to help those hit by the recession. Other objectives were to provide temporary relief for those impacted by the recession and to create solutions for infrastructure, education, health, and 'green' energy. The approximate cost of the package at the time of passing was $787 billion. This was later revised to $831 billion between 2009 and 2019 (CBO (2012)
The timulus package was based on Keynesian economics that argued that during periods of economic hardship, the government should step in by increasing public spending which would in…… [Read More]
In IBM's case, the Department of Justice found that their efforts were mired in failure. Unfortunately, IBM was so central to the economic operations of Germany and occupied Europe that it was necessary to preserve IBM's role in the economy of Europe so as not to jeopardize the postwar occupation.
Part II-Present Corporatist America and Comparisons with Fascist Italy-
When the Wall Street Journal, the United States' newspaper of record for financial affairs makes an explanatory note, it gives us all pause. Gerald F. Driscoll in "An Economy of Liars" takes aim at both the Obama and George W. Bush administrations when he speaks about the present economic reality and asserts "We call that system not the free-market, but crony capitalism. It owes more to Benito Mussolini than to Adam Smith ("An Economy of Liars" 2010)."
If a communist agitator on the proverbial soapbox spouted this statement, it could be…… [Read More]
Modifications That Were Made to Keynes' Approach by the Neo-Keynesians and the Implications for the Scope of Fiscal and Monetary Policies
The objective of this work is to examine the key modifications that were made to Keynes' Approach by the Neo-Keynesians and the Implications for the Scope of Fiscal and Monetary Policies. Keynesian economics is reported in the work of Chick (1983) to be understood as a certain set of policy prescriptions, yet in the General Theory; very little space is devoted to the implications of the theory for government policy." (p.316) The Keynesian doctrine held that the economy "could be stabilized and growth encouraged by policies -- mostly variations of government expenditure and taxation -- designed to alter the level of aggregate demand, while monetary policy was dismissed as impotent, not just in the particular circumstances of the 1930s and later 1940s but generally 'money did not matter'." (Chick,…… [Read More]
Both saving on a microeconomic sense and saving on a macroeconomic sense entail taking he long-term view into perspective for it means surrendering immediate gratification for achieving long-term goals, sometimes -- as in the microeconomic context -- for individuals not rated to us and for the greater good as well as for generations to come.
As Keynesian model shows, the nation can benefit more by placing its focus on domestic activities than on borrowing from foreign countries. By producing government bonds that have high interest rates and, subsequently, by encouraging citizens to invest in the nation's benefit, the nation only helps itself by providing more technology and more opportunity that opens up more room for employment and hence opportunity to slip out of its recession when times are difficult economically. Capital and labor are the basic inputs for goods and services, and the resources for capital and labor comes from…… [Read More]
Future of Capitalism
Current Economic Crisis according to Schumpeter and Keynes
A justification of the economic crisis can be precisely explained by shedding light on the perspectives of famous economists. The information gained through this method will not only be informative but will also motivate further research. The two economic theorists chosen are Joseph Schumpeter and John Maynard Keynes (Blankenburg & Palma, 2009). Their thoughts appear to be most pertinent to this crisis. Keynes presents a very keen insight into the crisis through his rationalization of market psychology and concentration on cumulative demand. On the other hand, Schumpeter's thought on improvement and business cycle offers a different informative justification.
The existing economic crisis has its origin rooted in the assumption about the real estate sector. The review of the incidents that have happened, began with the permission of quite low interest rates to financial institutions for borrowing. By a small…… [Read More]
Unemployment and its Effect on Aggregate Supply and Demand:
The Obama administration is looking for ways to create jobs and stimulate growth after temporarily setting aside the debt limit. The need for job creation and stimulating economic growth originates from the high unemployment that the country experiences. This high unemployment rate is an actual reflection of the serious shortfall of aggregate demand in the United States. The U.S. unemployment rate is high essentially because the country's economy is generating below its capacity. Actually, while the U.S. economy has made some gains from time to time, its real GDP is estimated at 6% below its trend path or capacity.
There are various reasons attributed to the high unemployment rate including its consideration as a consequence or outcome of the collapse of demand rather than a distinct, instantaneous problem. Some of the reasons attributed to the unemployment problem in the United States…… [Read More]
Thailand, like many third world countries, is interested in identifying the mechanisms by which economic growth may be achieved. Economic growth and more specifically 'rapid economic growth falls within the province of the mid-term and long-term macroeconomic policies (Dervis and Petri 1987, p. 211). Dervis and Petri, survey 20 'middle income' countries, in an attempt to identify the factors which contribute to successful development-which they identify as moderately rapid economic growth as measured by changes in the GDP ((Dervis and Petri 1987, p. 213-214). The work Dervis and Petri is over 20 years old; it is useful only to set a baseline for the macroeconomic challenges faced by developing countries, in comparison to the macroeconomic challenges faced by Thailand in 2011 and beyond.
Primary indicators of success in included among others, three factors. First, political stability- the authors note that often many developing countries experience a period of rapid…… [Read More]
Unregulated speculation in the U.S. stock market created a great crash in the financial markets that affected every corner of the globe. Global economic cooperation was essential to prevent such a worldwide catastrophe again, and without government involvement, such economic and political instability would reoccur, with devastating consequences.
In the 1970s, however, dissatisfaction with the social welfare state began to surface. Distrust with the federal government in the wake of the Vietnam ar began to rise. Nixon's attempts to instate wage and price controls and failed. Powerful trade unions in Britain brought the nation to a standstill, spurring on the rise of Thatcherism. America applauded Ronald Regan's union-busting policies regarding the air traffic controllers in America. orld economic events had demonstrated that higher inflation did not necessarily assure lower unemployment, just like the Chicago School economists had said, rather high government deficits to correct high unemployment only created a more…… [Read More]
Islamic economics extends these into the basics of investment for new venture creation, which is another aspect of Islamic accounting that specifically has been focused on from an economic growth perspective (Choudhury, 2001, 31-33).
Guido Berens, Cees BM van iel, Johan van ekom. 2007. The CS-Quality Trade-Off: When can Corporate Social esponsibility and Corporate Ability Compensate Each Other? Journal of Business Ethics 74, no. 3
September 1): 233-252. http://www.proquest.com (Accessed January 24, 2009).
Masudul Alam Choudhury 2001. Islamic venture capital - a critical examination. Journal of Economic Studies 28, no. 1 (January 1): 14-33. http://www.proquest.com (Accessed January 12, 2009).
Masudul Alam Choudhury 2006. Islamic macroeconomics? International Journal of Social Economics 33, no. 1/2 (January 1): 160-186. http://www.proquest.com (Accessed January 14, 2009).
Marios Katsioloudes, Tor Brodtkorb. 2007. Corporate Social esponsibility: An Exploratory Study in the United Arab Emirates. S.A.M. Advanced Management Journal 72, no. 4 (October 1): 9-20,2. http://www.proquest.com (Accessed…… [Read More]
This is because, the efficiencies in the market are: providing no kind of leverage to these individuals. At which point, any kind of advantage that they may have would be eliminated. This is important, because it provides good insights, as to how efficient the markets really are. As a result, this is what will reduce the underlying returns every single year. The author is an economist with Oxford University. (urton 2005)
The article that was written by Chen (2005), discusses how the EMH theory can be able to provide the most relevant information surrounding stocks. Yet, when this was compared against computer-based programs, they were able to identify changes in prices at least 50% of the time. This is important, because it is showing how the changes in the expectations for stocks, can be more accurate when using various programs. Once this takes place, it meant that traders and investors…… [Read More]
A third cause of unemployment is actually the result of employers' attempts to keep their employees happy and content. In this effort employers raise their employees' wages above the prevailing rate. This creates a demand for those positions that exceeds their availability. In response, unemployment is again created.
Finally, the process of seeking employment actually creates some measure of unemployment. Job seeking requires time and energy and those seeking jobs are limited in their ability to maintain other employment. Thus, unemployment develops as those seeking employment forego other employment in order to procure the position they truly want.
The fact that there is a relationship between unemployment and the economy is clear but the precise nature of this relationship is still not fully understood. The variables are many and not fully understood by even the most experienced and best educated of economists. If the relationship were fully understood unemployment levels…… [Read More]