...Review of Keynesian Economics, Inaugural Issue, Autumn 2012, pp. 1–4 Statement of the Co-Editors Economics and the economic crisis: the case for change It is widely recognized that economic crises can sometimes trigger enormous change, with regard to both economic theory and the politics of governance. Today, the global economy is struggling with the fall-out from the financial crash of 2008 and the Great Recession of 2007–2009. The economic crisis that these events have generated, combined with the failure of the mainstream economics profession, has again put the question of change on the table. The economics profession stands significantly discredited owing to its failure to foresee the recession and the financial crash, its repeated over-optimistic forecasts of rapid recovery, and the lack of plausibility surrounding its attempts to explain events. Reasonable people do not expect economists to predict the daily movements of the stock market, but they do expect them to anticipate and explain major imminent economic developments. On that score, the profession failed catastrophically, revealing fundamental theoretical inadequacies. This intellectual failure has prompted us to launch the Review of Keynesian Economics. At a time of journal proliferation, some may wonder about the need for another journal. We would respond there is a proliferation of journals, but that proliferation is essentially within one intellectual paradigm. As such, it obscures the fact that the range...
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...John Maynard Keynes He was a famous economist born on 5th June 1883. His father was an economics professor at Cambridge. son of a Cambridge economics professor If ever there was a rock star of economics, it would be John Maynard Keynes. Keynes shares his birthday, June 5th, with Adam Smith and he was born in 1883, the year communist founder Karl Marx died. With these auspicious signs, Keynes seemed to be destined to become a powerful free market force when the world was facing a serious choice between communism or capitalism. Instead, he offered a third way, which turned the world of economics upside down. In this article, we'll examine Keynes' doctrine and its impact. (To read about Adam Smith, be sure to check out Adam Smith: The Father Of Economics.) Keynes was ultimately a successful investor, building up a private fortune. His assets were nearly wiped out following the Stock Market Crash of 1929, which he failed to foresee, but he soon recouped. At Keynes's death, in 1946, his worth stood just short of £500,000 – equivalent to about £11 million ($16.5 million) in 2009. His first prediction was a critique of the reparation payments that were levied against the defeated Germany after WWI. Keynes rightly pointed out that having to pay out the cost of the entire war would force Germany into hyperinflation and have negative consequences all over Europe. He followed this up by predicting that a return to the prewar fixed exchange rate sought by the chancellor of the exchequer...
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...These fluctuations occur around a long-term growth trend, and typically involve shifts over time between periods of relatively rapid economic growth (an expansion or boom), and periods of relative stagnation or decline (a contraction or recession).Business cycles are usually measured by considering the growth rate of real gross domestic product. Despite being termed cycles, these fluctuations in economic activity can prove unpredictable. History A BASIC ILLUSTRATION OF ECONOMY/BUSINESS CIRCLE. Theory The first systematic exposition of periodic economic crises, in opposition to the existing theory of economic equilibrium, was the 1819 Nouveaux Principes d'économie politique by Jean Charles Léonard de Sismondi. Prior to that point classical economics had either denied the existence of business cycles, blamed them on external factors, notably war, or only studied the long term. Sismondi found vindication in the Panic of 1825, which was the first unarguably international economic crisis, occurring in peacetime. Sismondi and his contemporary Robert Owen, who expressed similar but less systematic thoughts in 1817 Report to the Committee of the Association for the Relief of the Manufacturing Poor, both identified the cause of economic cycles as overproduction and underconsumption, caused in particular by wealth inequality. They advocated government...
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...Economics BS1547 Introduction to Economics Macroeconomics Assignment- 1 Neo-Classical and Keynesian “The study of how society, and those in society allocate scarce and hence valuable resources between competing uses can be defined as Economics”(Jones, 2013) which was founded by Adam Smith in 1776. “The field of Economics that deals with the aggregate economy and changes in its level of unemployment, national income, growth rate, GDP, inflation and price level is called Macroeconomics.”(www.investopedia.com) As economics developed two distinct approaches were seen to immerge the Neo Classical which stated that Macroeconomics = ∑Microeconomics and the Keynesian which stated the opposite. Both these approaches are still followed in the managing of the present world Economies. Figure 1. As seen above, Neo classical approach lasted several years before the Great Depression, but was revived once again after the period of stagflation when the Keynesian approach failed to improve the economic condition. The Neo Classists approach influenced by Adam Smith and others with reference to the ‘invisible hand theory’ (Jones, 2013) stated that the “market is best left alone and that it will adjust and clear itself and hence finding its own macro-equilibrium.” (Jones, 2013) Keynes suggested that this is not realistic approach and that “government intervention is needed for the market to reach its macro-equilibrium.” (Jones, 2013) The Neo Classical approach towards Economic production states...
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...research will prove how the American government is conducting fiscal policy in a way that abuses Keynes’ theory on government spending, and, as a result, why Keynes would not support the American government in their spending endeavors, despite using his theory as their justification. I will be critiquing the application of Keynes’ theory from the Austrian, specifically the works of Friedrich A. Hayek, and Monetarist perspectives, supported by arguments given by Milton Friedman. Section 1: Keynes’ Theory on Government Spending John Maynard Keynes published his famous work, The General Theory of Employment, Interest, and Money, in 1936, during the Great Depression. Economies all over the world were suffering severely from the Great Depression, and there was little hope of economic recovery in the near future. Keynes agreed with the classical economist’s notion that the economy would correct itself in the long run, but was famously quoted, “In the long run we will all be dead,” which perfectly reflects people’s growing doubt in their economies during the Great Depression. Motivated by this belief Keynes, a British economist, challenged Classical economic thought, which was the mainstream economic theory at the time, “…[C]lassical economics offered...
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...The information within the paper will discuss and analyze the collapsing foundation of the economic structure in the United States. The widespread knowledge of economical stresses has become more apparent in recent years. These stresses include many different aspects such as; unemployment rates, expectations, consumer income, and interest rates which have been severely weakened in the United States` once prosperous economy. The issues can no longer be ignored nor overlooked as it is imperative that the nation acts accordingly, in order to preserve what is left our nation’s financial strength. A substantial part of these struggles are a result of an abnormal amount of government spending by the officials appointed in charge of the nation’s spending habits. A reorganization of government spending is essential for the strengthening of the economy. For example, the National Conference of State Legislators stated “Top state fiscal issues generally fall into two categories: the must-address issues and the ones lawmakers (including governors) would like to address. Must-address issues such as Medicaid and education arise every year because they account for $1 out of every $2 of general fund spending.” Naturally, it is extremely important to address educational and medical needs that should be met by residents of towns and citizens of this United States. Unfortunately, it has become apparent that some of the most economically important occupations are receiving pay cuts, layoffs, and...
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...Economic Forecasting Economic Forecasting Gathering historical economic data as well as economic forecast data can be a very important and useful tool for a business, business research, and planning. There are several resources available in which a company can access this type of information for their advantage. For instance, through archiving data, collecting and running records, recollecting, economic data and forecast service providers or analytics, and other secondary resources. One useful source is the U.S. Small Business Administration. Their website lists multiple economic data resources tailored to different variables such as inflation, consumer reports, price index, accounts data, and the U.S. Census Bureau just to name a few. Furthermore, you can even access economic issues discussed at the White House and the plans intended to improve economic conditions. On the U.S. Small Business Administration’s website, there are very useful quantitative and qualitative forecasting factors. The whole website has a slew of quantitative factors with a lot of helpful statistics. Some important statistics to look at would be the trade and income figures. Trade statistics indicate how much money and product are being imported and exported within different time frames. It also gives an estimate into international transactions that are open at the moment. Income statistics give individuals access to know about different salary levels based on categories...
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...is funded by government borrowing; the government issues long‐term, interest‐bearing bonds and uses the proceeds to finance the deficit. The total store of government bonds and interest payments outstanding, from both the present and the past, is known as the national debt. Thus, when the government finances a deficit by borrowing, it is adding to the national debt. When government expenditures are less than tax revenues in a given year, the government is running a budget surplus for that year. The budget surplus is the difference between tax revenues and government expenditures. The revenues from the budget surplus are typically used to reduce any existing national debt. In the case where government expenditures are exactly equal to tax revenues in a given year, the government is running a balanced budget for that year. Expansionary and contractionary fiscal policy: Expansionary fiscal policy is defined as an increase in government expenditures and/or a decrease in taxes that causes the government's budget deficit to increase or its budget surplus to decrease. Contractionary fiscal policy is defined as a decrease in government expenditures and/or an increase in taxes that causes the government's budget deficit to decrease or its budget surplus to increase. Classical and...
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...Principles of Macroeconomics, 9e - TB1 (Case/Fair/Oster) Chapter 18 Debates in Macroeconomics: Monetarism, New Classical Theory, and Supply-Side Economics 18.1 Keynesian Economics 1 Multiple Choice 1) Who wrote the General Theory of Employment, Interest, and Money? A) Adam Smith B) David Ricardo C) Milton Friedman D) John Maynard Keynes Answer: D Diff: 1 Topic: Keynesian Economics Skill: Fact 2) Keynesian economics includes the idea that A) economic policies are ineffective. B) the economy is basically stable. C) prices adjust to clear the markets. D) labor markets don't always clear due to wage rigidities. Answer: D Diff: 1 Topic: Keynesian Economics Skill: Fact 3) Among the propositions of the Keynesian school of thought is A) economic policies are ineffective. B) aggregate supply management is the key to a stable economy. C) aggregate demand determines equilibrium output. D) rational expectations. Answer: C Diff: 1 Topic: Keynesian Economics Skill: Fact 4) Keynes believed which of the following? A) The government has a role to play in fighting inflation, but not in fighting unemployment. B) The government has a role to play in fighting unemployment, but not in fighting inflation. ...
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...important to discover new ways of thinking about what is already known than to discover new data or facts”. This great dilemma, which the question is based on, is in choosing between discovering new ways of thinking about what is already known and discovering new data or facts, is quite a complicated task. Before I begin, the terms “new ways of thinking”, “facts”, and “data” must be defined. According to various dictionaries, data is defined as a series of observations, measurements, or facts; information is defined as an event which is known to have happened that can be verified through experience or observation. The phrase “new ways of thinking”, seems more ambiguous because how can there be new ways of thinking? However, for this essay, the definition of thinking from a different perspective or thinking in a way that is different from all previous ways of thinking is used. This, however, allows different people to have different new ways of thinking. A new way of thinking to one person would no longer be the same to another person. Most often, people would firmly say that new ways of thinking are innovative and new advances are advantageous; for example, in Economics, advances in technology would lead to a greater productive and allocative efficiency, which would result in greater levels of economic growth for a certain country, which, of course, it’s a great benefit for the society. However, there is also a need for discovery new data and facts to broaden our knowledge...
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...importance due to the great depression faced in the United States and other countries that started just a decade before. The resource NBER Macrohistory Database would be an excellent choice to examine the economic state of some countries during and after one of the most significant wars in history. The site covers a variety of data records including business cycles, job creation, job data, and the status of import dealings, segregation, and even children’s health. The study of the causes and effects of the war are truly remarkable. A majority of the statistics were dealt with on a quantitative level with facts and little decisions of personal opinions about the war. This resource is a great source of study for the plethora of data about the world at war. The concepts pertaining to the benefits of the trade are very understandable, yet seem to be extremely selfish and somewhat cutthroat altogether. At the end of the day, it is all about supply and demand, which makes it smart business. Quantitative research provides information about the future based on past trends. The Bureau of Economic Analysis generates various closely inspected economic data that impacts the decisions of civil servants, enterprises, and individuals. They provide an expansive up-to-date image of the United States economy. The bureau is a part of the United States Department of Commerce which provides analysis on input, output, savings, investments and balances of payments from various regions or sectors...
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...with the economic terminology, and view what production/income, prices, and cyclical indicators are in the United States, an Internet website called AmosWEB Encyclonomic WEB*Pedia can retrieve resourceful information. This site has great information for a consumer to become familiar with economic terminology and economic standing. Some of this information on the site indicates the “Real GDP as of third quarter 2012, $15,775.7 billion (Annual Rate) Source: BEA, up 2.0% 1st Est. revised up from 1.3%. Unemployment as of October 2012 is 7.9% up from last month. This information was obtained from the Bureau of Labor and Statistics. The consumer Price Index W, as of August 2012 is 227.056.” A person can even view what the prime rate is for American loans which are 3.25%. AmosWeb pulls information from other sites and make it easier for consumers to view these numbers in one location instead of viewing different consumer sites. The U.S. Department of Commerce contains the Bureau of Economic Analysis, and this bureau maintains the website www.bea.gov. This website contains all of the BEA’s published information, including news releases and a comprehensive array of economic statistics. In particular, the statistical information available from the BEA includes most major economic indicators, and covers leading, coincident, and lagging indicators. In addition, most of the statistics available include historical information dating back to at least 1969, with some of the information...
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...Macroeconomics January 16, 2013 Meriem Boulhimez FINAL EXAM Microeconomics is the section of economics that concerns single factors and the effects of individual decisions. It is commonly known to be the study of individual decisions of a single business entity. It consists of analyzing the price of a particular product, the capacity production of a product, and how the price of each product in the market is affected by the forces of supply and demand. It considers regulations, taxes, and analyzes markets in order to effectively set a value for a specific good or service. The decisions made on a microeconomic level are very pinpointed and precise. The outcome directly affects the supply and demand chain as well as other forces that determine the price levels seen in the economy. For example, microeconomics would access how a specific business could maximize its production so it could lower prices and compete more fiercely with its competitors. In order to come up with these solutions, microeconomics considers various variables such as the relationship of a firm with the market and the appropriate price of a product to maximize profits. On the other hand, Macroeconomics is a broader study that involves the economy as a whole, not just one particular company since it assesses entire industries. For example, macroeconomics covers subjects such as an economy’s GDP and how it is closely linked to unemployment rates, since they mutually influence one another. Besides...
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...reasoning and writing, a clear formation of economic structures started. The discipline of economics, as we understand it today, emerged in the 17th and 18th centuries as the western world began its transformation from an agrarian to an industrial society. The word “economics” is derived from the Greek word “okionomia”, which means “household management “or “management of household affairs”. The study of economics became necessary because due to the fact that resources were scarce as well as limited and that not all human wants and desires can be met. How to distribute these resources in the most efficient and “equitable” way is a principal concern of economists. There are three (3) different branches of study in economics that depicts the word “History and Economics”, they are Economic History, History of Economics and The History of Economic Thought. Therefore the History of Economics can be defined as a science of the body of classified knowledge based upon the establishment of certain uniformity in economic life. The body of this work is divided broadly into two parts; * A brief history of economics as a discipline * Some historical positions regarding the history of economics, which include; Mercantilism, Physiocracy, Classicals, Neoclassicals, Marxism, Keynesians, Current theories, and the significance of studying the history of economics SECTION I A Brief History of Economics as a Discipline ANCIENT/PRECLASSICAL (384BC-1776) The study of the economy in western civilization...
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...economic trends in the US particularly on unemployment, interest rates, and consumer income including the expectations of both the consumer and business sectors. This paper will also discuss the effect of these economic indicators on the aggregate supply and demand and the evaluation of current fiscal policies that were recommended by the government. This paper aims to let future business managers be aware of the importance of comprehending current US fiscal policies as it outlines the blueprint of change to the US economy. Current Economic Trends Unemployment is a term that you will hear often when spending time in any city in the United States. It is an issue that is spoken of from the dinner table to the oval office. The United States experienced its “worst downturn since the Great Depression” but continues to recover adding 176,000 jobs to the private sector in March-April 2013 and reducing unemployment to 7.5% (Bureau of Labor Statistics, 2013). President Barack Obama has introduced large plans to reform banking in America. The people of the U.S. expect to see banks become more regulated, they expect that home loans will be reasonable, they expect that the White House will follow through on their promises to ensure banks and credit card companies are fair, and they expect that they will be able to keep their homes. They also expect that they will have jobs to go to soon. The president also has plans to raise the minimum wage, something that has not happened in a while...
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