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Neoclassical economists are naturally more reluctant than Keynesians to concede that capitalism as a system might be dysfunctional or that markets might be irrational and inefficient, leading to cycles of boom and bust, mass poverty and unemployment, which happened in the 1930s and is happening again today. One of the main assumptions in the classical model is 'full employed equilibrium' or in other words 'absence of involuntary unemployment.' The classical model assumes that supply of labor and real wage are positively related. Assuming that the wages are flexible, the aggregate supply curve is vertical because a change in the price level does not affect the output. Equilibrium occurs when aggregate demand and aggregate supply intersect. In the absence of regulations, the labor market is always in equilibrium, thus the intersection point determines the real wage, and equilibrium demand and supply. Since the demand and supply are equal in…… [Read More]
This means that the impact will be the result of natural attrition. So the theoretical firm's wages are resent every once in a while. Productivity will not respond right away to wage changes, but will happen as the natural course of turnover occurs.
There are several policy implications for the New Keynesian school. One is that government intervention is required. hile new classical economists view recessions as a natural component of the business cycle, New Keynesians believe recessions to be the result of market failure. Thus, intervention is required in order to correct the failure and put the economy back on course.
The Economic Crisis
The New Keynesian school would view the current economic crisis as a market failure. The failure would likely be identified as the real estate bubble, which can be attributed to a number of externalities. The Fed reduced rates sharply to stimulate growth in the wake…… [Read More]
Turning to Keynes economic theory, we find an economist known as John Maynard Keynes who is Irish as the main man behind this theory. This theory brings on board the foundation of less than chock-a-block employment as well as the government factor which comes in handy with guiding principles to even out the financial system at symmetry at or in close proximity to chock-a-block employment by means of up to standard anticipated inflation. To impede Classical economists from locking in on the subject of the long run, he come up with this quote "Long run is a misleading guide to current affairs. In the long run we are all dead." One of the issues that this theory has brought out clearly is the important role of government in steadying out financial sequence wallops, among the items it stressed on are; tax breaks, government expenditure as well as hikes…… [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]
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]
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]
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]
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]
To increase effective demand, Keynesians believe the government must balance the economy with deficit and increase expenditure. However, the constant alternation between booms and recession is causing the booms to get shorter while the recessions become longer. This phenomenon is the result of empirical evidence that indicates that in the end, the interest rates decrease.
However, this situation creates a problem of capitalism as the rich increase their wealth while financial deficit worsens. Minsky adopted the perspective of Keynesians, hypothesized financial instability, as the finance and money that connects the present with the future, but the future is uncertain. Minsky finds the problem of financial stability is in financing. However, financial instability increases under contemporary capitalism, which increases economic crisis. This leads to the conclusion that to solve economic crisis, there is a need to reduce financing and take up investments in real economy.
This is in contrast to the…… [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]
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]
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]
Evaluating the current state of the United States economy
Although many are of the opinion that the recession that the globe was forced into in 2008 is finally uplifting and signs of economic revival can be witnessed. The resulting high levels of debt and unemployment from the recession had dragged many countries, especially the United States in to a state of economic turmoil. In order to reverse the effect of such factors, the United States government has implemented strategic monetary and fiscal policies. These policies attempt to rejuvenate the economic position of the country by not only controlling the supply and demand via tax cuts but also through re-setting the interest rate level in accordance to the low level of disposable income available to the unemployed / lowly employed citizens of the United States can acquire loans to allow easy spending and repayment of the loan as well.…… [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]
Low Cost Airline in Thailand
The Study on Improvement of Low Cost Airline in Thailand
Geography of Thailand
Nature of Airlines
Variables under Study
The Profitability of Low Cost Airlines in Thailand
Operating esults, Selected Airlines, Financial Year 1999
The Economies of Scale Attained By Airline Industry
Human esource Practices
The future of low cost Thailand Airlines
Contrasting Qualities of State Owned and Non-State Owned Airlines
The Study on Improvement of Low Cost Airline in Thailand
Thailand is a global source for customers seeking cheap labor or material inputs. The country is rich in natural resources -- tin, rubber, natural gas, tungsten, and timber being a few examples. The country is a major source for agricultural products1a.
Thailand also has an abundant supply of low-skilled labor with high participation rates in the workforce 86% for males and 67% for females in 1995. At the same time, the country…… [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]
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]
Causes of ecessions: Comparison and Contrasting of Theories that Explain the Causes of ecessions
The Causes of ecessions
A recession can be defined as two or more consecutive quarters of declines in economic activity, normally indicated by changes in household income, industrial production, real gross domestic product (GDP), employment, and wholesale retrial sales. According to Knoop (2010), a recession is usually characterized by a drop in the stock market, a decline in housing prices, increased rates of unemployment, business contractions, and consecutive declines in the GDP.
Some triggers of full blown recessions may include inflation, supply and demand shocks, financial crises and exchange rate fluctuations that affect international trade. However, Knoop (2010) states that economists often rely on business cycle data to study macroeconomic relationships that may point to a recession. Business cycles, which are the expansions and contractions in the levels of economic activities, often have peaks and troughs…… [Read More]
According to this theory, the spending of the government has a positive macroeconomic effect on employment and national income due to its multiplier effect. As per this theory, given the resources, the employment and output level of an economy is measured by the aggregate demand. Lack of aggregate demand causes unemployment and demand deficiency causes economic fluctuations. This demand deficiency can be eliminated by way of compensatory government spending. The Keynesian theories, however, could not provide solutions to the economic problems of developed nations. These problems included low growth, and high unemployment levels accompanied by high rates of inflation or stagflation. (Froyen, 2008)
Consequently, new schools of macroeconomic thought emerged which included monetarism, new classical monetarism, supply-side economics and new Keynesianism. According to the monetarists, the supply of money is the key factor that influences employment and output in the short run and level of prices in the long-term. According…… [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]
Due to increase in exports the trade deficit decreases. Whereas, the contractionary monetary policy has a negative impact on the balance of trade account as it leads towards a decrease in government expenditure, production and exports. Because of the decrease in exports, the trade deficit increases. (Schiller, 2010)
Money and Its Functions
Money can be defined as anything which is generally accepted in exchange for goods and services and which acts as a medium and store of value. The three major functions of money are; 1) it acts as a medium of exchange and is accepted as a payment for goods and services, 2) the value of different products is measured in terms of money, 3) it acts as a store of value because it is generally accepted as a medium of exchange and has a stable value. Banks usually create money in the economy by issuing loans and by…… [Read More]
Class struggles are one type of such instability, and this instability is hinted at again and again throughout the novel. Esteban's rape of one of the servants at the hacienda is indicative of the subjugation and authority that exists within the household, and the fact that this union ends up resulting in a child can be seen as indicative of the generative power of such a power and class structure. This child also ends up having a child, however, and the grandson of this class rape completes the cycle of violence by imprisoning and raping Esteban's granddaughter, showing a new type of class dominance that is representative of the equal evils yet changed perspective of the socialist/Communist regimes.
Gender Struggles and Female Power/Independence
Another very evident strain throughout the House of Spirits, and one that can be seen in both instances of rape along with may other events and details…… [Read More]
In terms of similarities, each of these budgets contains roughly the same basic format. hile the specific charts may differ, each budget separates revenue sources and attempts to break those down. The budgets also explain the expenditures, and typically break these down to each individual program within the department.
A similarity between three of the budgets (Federal, Florida and Newark) is that they rely heavily on tables and written explanations. hile these tables are necessary in any budget, it is interesting to note that the Newark budget is significantly more visually-oriented than any of the other budgets. The graphic representation of some of the figures makes for a more user-friendly presentation. The other budgets are less likely to be understood by those without some financial training.
Each of the budgets is produced to unique specifications. There appears to be no standard with respect to the production of public budgets, so…… [Read More]
Domestic Policy Presidential Debate 2012
The two presidential candidates, President Barack Obama and Governor Mitt omney, held a debate regarding domestic policy issues in Denver, CO. The main focus of the debate was the state of the United States economy, but other issues were discussed as well. Of course, the economy was the most prevalent because most of the other issues related to it in some way. This paper will look at the debate from a personal perspective and examine not only the topics, but how the moderator did and whether the candidates should have examined other topics.
The debate opened with the President committing to a talking point related to the economy that discussed taxation policy and its relation to providing robustness. The basic difference between epublicans, whose base holds to a conservative economic stance, and the Democrats, whose base promotes a Keynesian stance, is where revenue…… [Read More]
Macroeconomic News Analysis: Unemployment
According to recent figures reported in the New York Times article "Consumers push economy to a gain of 2%," the U.S. economy expanded 2% in the third quarter, a slightly swifter pace than had been anticipated. Consumer confidence is on the rise thanks to the fact that the "market has stabilized, households have been buoyed by lower energy prices, until recently a rising stock market and a slight improvement in employment. After years of shedding debt, there are also signs that consumers are starting to borrow" again (Schwartz 2012:1). According to the Keynesian theories of the business cycle, consumers during a recession will hold onto their money and it is necessary for the government to infuse cash into the economy, to bring it to a state of health once again. Only when people feel more secure about their jobs will they spend money again. The federal…… [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]
usinesses experience profit cycles implying that market fluctuations are inevitable in an economy. Market demand plays a crucial role in the profitability of an enterprise and consequently affects the investment trend. A profitable firm is more likely to invest money to improve production facilities or to extend its business into other domains. Investors will analyze the profitability of any undertaking and only if the expected revenue is greater than the cost of capital will they invest in the project. Keynesian theory also states that the Marginal efficiency of Capital is inversely related to investment. "[t]o induce new investment 'the rate of return over cost must exceed the rate of interest'. [Richard C.. Johnsson] For all businesses profit is the ultimate motivation and any new venture is undertaken only if the internal rate of return is above the cost of capital defined by the prevailing rate of interest. Hence…… [Read More]
Apple and a Working Capital Loan
Apple (AAPL) will seek a working capital loan in order to heighten its dividend payment to shareholders. Although Apple is cash rich, a large portion of its capital is held in offshore accounts and to repatriate those holdings in order to benefit shareholders would require Apple to pay a significant tax on those holdings, which can be avoided by taking on new debt to fund the new dividend payments (Ehrman, 2013). The economic context in which Apple is thus taking the loan is one in which wealthy corporations are taxed in the U.S. at a tax rate that is among the highest in the industrialized world, which prompts many companies to seek tax havens abroad (Ehrman, 2013). However, there is a still greater economic concern that should be considered at this time -- and that is related to the economic implosion of 2008, in…… [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]
Under Paul Volcker's chairmanship of the Federal eserve from 1979-1987, to uphold a philosophy Volcker identified as monetarist, the Fed would try to hit specified monthly targets for the growth rate of the monetary supply, "with operating procedures that emphasized control over a narrow and controllable monetary aggregate, non-borrowed reserves (i.e., bank reserves minus borrowings from the Fed)" (McCallum 2008).
After an initial painful period of recession, Volcker's actions had the desired effect upon inflation rates. However, both monetarists and non-monetarists were quick to point out that despite the attempt to hit monthly targets, "because growth rates of M1 fluctuated very widely on a month-to-month basis; the operating procedures in place were, because of lagged reserve requirements, extremely poorly designed for the control of M1; and the Fed never forswore discretionary responses to current cyclical conditions" (McCallum 2008). In fact, "Volcker's strategy to defeat double-digit inflation had been classically Keynesian:…… [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]
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]
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]
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]
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]
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]
(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]
Neoliberal Social Theory
Neoliberalist Theory has been known and defined as a philosophy or thinking that promotes the continuous production and distribution of goods and services, and is adapted after the concept of Neoclassical economy that the economist Adam Smith had introduced in his book, "The Wealth of Nations." Through Adam Smith's famous economic and philosophical treatise, the idea that market economies can function and regulate itself without government intervention came into being. This is precisely one of the most important characteristics of neoliberalism: the market economy produces and distributes goods and services at an optimum and efficient rate without any intervention from the government.
Neoliberalist theory is characterized by a number of important aspects, which are the following: it promotes "a stable currency, free market capitalism, and free trade" (Wikipedia 2002). Further, neoliberalism advocates not only for deregulation, self-regulation, and free trade, but also to privatization of business enterprise…… [Read More]
A b) Consider the articles on behavioral economics at http://myweb.liu.edu/~uroy/eco54/histlist/behav-econ/index.html. Summarizethe main thrust of some of these articles. Based on these articles, what's your opinion of behavioral economics? Do you think behavioral economics represents a return to Veblen's ideas?
In many respects it can be agreed that behavioral economics has much in common with Veblen's theories. Behavioral economists agree with Veblen that in most cases humans act illogically, because they are driven by instincts rather than by pure reason.
Thorstein Veblen stated that economic processes are mainly affected by evolution, social relations, political situation and other factors which are more global than circulation of money and accumulation of wealth. His ideas of social relations domination in economics have much in common with ideas of behavioral economists, who state that economy is much affected by psychological factor, or behavior of social groups.
It's proved by a number of applied researches held…… [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]
A lot of debates exists out there in the economic ether regarding the best economic structure for an economy. Even so, there is a broad amount of consensus that exists regarding what should be done during expansionary economic shifts and what is less than wise. With that in mind, the author of this report shall address a number of questions related to that overall topic including what should be done with taxes, government spending and the general tools of the Federal Reserve Bank including the changing of the reserve ratio requirements, the discount rate and the selling of government securities. There is also the question on what happens with things like aggregate demand, gross domestic product and employment. While predicting the outcome of economic efforts and policy can sometimes be hard to pin down, there are best practices that are generally held to be better than others when…… [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]
Keynes and Galbraith
John Maynard Keynes and his leading North American disciple John Kenneth Galbraith insisted that traditional free market capitalism and laissez faire economic thought of the 19th Century variety were no longer valid to the problems of modern industrial society. As Keynes wrote in his classic book The General Theory of Employment, Interest and Money (1936), laissez faire was inadequate to deal with the mass poverty and unemployment of the Great Depression. As he explained to Franklin Roosevelt, during a depression, the government had to direct the economy, using deficit spending to maintain full employment and consumption levels: it had to make the necessary investments that the private sector was no longer willing or able to make. In The Affluent Society (1958) he noted that Keynesian social democratic and welfare state policies had greatly reduced poverty and inequality in the U.S. And other estern countries, and was confident…… [Read More]
This also implies inadequacies in fiscal sustainability, which influences investments in private sectors.
The second channel happens through the level, composition and quality involved within the public investment, which shows the level at which the public investment replaces the private investments (Schmidt- Hebbel, Serven, & Solimano, 1996).
The final channel regards the level of taxation on the corporate earnings and the rules applicable in depreciations.
There have been arguments that fiscal policy and public expenditure reduces the private investments in two different manners. These include increasing the interest rates or lowering the private funds involved in financing the investments.
According to the neoclassical theory, the interest rate is also an imperative variable in finding the level of investment. Consequently, it results into a negative effect because it upsurges the interest payable in investments. Concurrently, McKinnon and Shaw, contends that this is likely to cause a positive relationship between the investment…… [Read More]
Critically for the long-term economic situation, it meant many Japanese firms were lumbered with massive debts, affecting their ability for capital investment. It also meant credit became very difficult to obtain, due to the beleaguered situation of the banks; even now the official interest rate is at 0% and have been for several years, and despite this credit is still difficult to obtain
Overall, this has led to the phenomenon known as the "lost decade"; economic expansion came to a total halt in Japan during the 1990s. The impact on everyday life has been rather muted, however. Unemployment runs reasonably high, but not at crisis levels (the official figure is a little under 5%, but this is a considerable underestimate - the real level is probably around twice that). This has combined with the traditional Japanese emphasis on frugality and saving (saving money is a cultural habit in Japan) to…… [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]
raising minimum wage relates supply demand analysis. • If raise minimum wage businesses compensate raise workers? • According United States Department Labor, Minnesota's current minimum wage large employer's small employer's hour? • How hard working people expect ahead minimum wage low? • Due cost living minimum wage increase? This a comprehensive paper a minimum library resources.
aising the minimum wage: Supply and demand analysis
Although there is a great deal of disagreement about how to regulate the minimum wage in America, statistics indicate that the minimum wage has not been keeping pace with inflation. "The federal minimum wage is just $7.25 an hour and hasn't been raised in three years. But a raise is much more overdue than that. If we look at the minimum wage 44 years ago, and simply adjust it for inflation, it would be more than $10 today" (Weisbrot 2012). However, there is tremendous resistance to…… [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]
Lenin's form of Marxism/Communism as applied to the Russian economy backfired. Why? What happened? What went wrong that he and other Marxists/Communists did not anticipate?
Of course, Lenin wanted to improve productivity and use this improvement as a means to create and uphold operations of Lenin's version of a Marxist economy. Lenin attempted to take classes of people and improve the economy even though the first World War was causing problems. They tried the War Communism approach. owever, it did not go well because Lenin did not accurately guage the level of Russia's economic problems. In addition, Lenin pushed too hard and two soon into full-fledged Communism and the country was simply not ready for that yet. e also tried the NEP, confiscation of a portion of business products and so forth and that equally failed.
Lenin coined the phrase, "Commanding eights" to describe the system that managed the economy…… [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]
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]
The authors use everyday examples, such as "investment in a newly formed small business" to make their economic processes more understandable to anyone who understands modern business, and this is one of the things that makes this book so readable, and so fascinating, even for someone who might not be that interested in economic theory and practice.
The Friedman's support many ideas that would reduce the authority of government in many economic areas, including the "negative income tax, the volunteer army, an improved method of auctioning Treasury securities, the monetary rule for achieving price stability; the voucher system for education, the flat tax, and flexible exchange rates" (Jordan et al. 199). It is quite amazing to see just how many of these Friedman ideas have made their way into our business and political world, including the volunteer army, the educational voucher system, and flexible exchange rates, to name a few.…… [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]
The British created a well-educated, English-speaking Indian elite middle class d. new jobs were created for millions of Indian hand-spinner and hand-weavers
The Indian National Congress can best be described in which of the following ways:
a. An Indian Civil Service that administered British rule.
b. A group of upper-caste professionals seeking independence from Britain.
c. white settlers who administered British rule.
d. anglicized Indians who were the social equals of white rulers.
Under the Culture System, Indonesian peasants had to Answer:
a. learn to speak and read Dutch b. plant one-fifth of their land in export crops to be turned over to the Dutch colonial government c. convert to the Dutch Reformed Church d. join large state-run farms.
Modern Vietnamese nationalism traced much of its inspiration to Answer:
a. Japanese modernization.
b. China's "Hundred Days" Reform program.
c. The U.S. Declaration of Independence.
d. British Fabian socialism.
The…… [Read More]
Community Oriented Policing
new and comprehensive strategy against crime: Community Policing:
For the purpose of reducing neighborhood crimes, creating a sense of security and reduce fear of crimes among the citizens and improving the quality of life in the community, the community policing strategy will be proved to be the most effective one. The accomplishment of all these objectives to develop a healthy and clean society can be done by combining the efforts of the police department, the members of the community and the local government. "The concept of community policing is not very new however it has gained attention in last few years. It is an approach to make a collaborative effort between the police and the community in order to identify and solve the problems of crime, societal disorder and disturbances. It combines all the element of the community to find out the solutions to the social problems.…… [Read More]
The successful firms have the war chest, and often this was acquired through strong long-term planning. Thus, successful firms have the ability to build upon that success during economic downturns, which sets them up to be in an even stronger position when the next downturn strikes.
Becton, B., & Schraeder, M. (2009, January). Strategic Human Resources Management. Journal for Quality & Participation, 31(4), 11-18. Retrieved May 5, 2009, from Academic Search Premier database.
Birdi, K., Clegg, C., Patterson, M., Robinson, A., Stride, C., all, T., et al. (2008, September). THE IMPACT OF HUMAN RESOURCE AND OPERATIONAL Management PRACTICES ON COMPANY PRODUCTIVITY: A LONGITUDINAL STUDY. Personnel Psychology, 61(3), 467-501. Retrieved May 5, 2009, doi:10.1111/j.1744-6570.2008.00120.x
KEPES, S., DELERY, J., & GUPTA, N. (2008, August). STRATEGIC HUMAN RESOURCE Management: A SYSTEMS PERSPECTIVE. Academy of Management Proceedings, Retrieved May 5, 2009, from Business Source Premier database.
D'Aurizio, P. (2008, November). Southwest Airlines:…… [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]
2004). The new Fed chairman would necessarily have to monitor inflationary pressures to prevent spikes in the cost of living. n this note the new Chairman would move from a policy of targeting core inflation which excludes the so called volatile food and energy prices, and focus on the headline rate which includes these components. Additionally the Consumer Price Index calculation would change to reduce the weight of housing in the index, "which makes up 41% of the typical consumer's budget" (Mankiw, G. 2004). More weight would be placed on those items which have steadily increased in price far above even the headline rate over the last decade: energy, food, health care, and education. These steps would help stabilize the dollar as a store of value for the consumer and investor.
The last selection criterion for the new chairman will be their belief in the purpose and efficacy of the…… [Read More]