Monetary Policy is used to make changes in the nation’s supply of money. These changes affect interest rates which affects the amount of spending. Monetary policy is supposed to get price levels stable increase employment and grow the economy. In chapter 15 of our text it shows a consolidated balance sheet of the Federal Reserve Banks. The Federal Reserve Banks (there are twelve Federal Reserve Banks) are really a “banker’s bank” (McConnell, Brue 2005).
Recently however the debate has shifted from the classical questions that Marx and Weber were asking over a century ago- How is class defined? What are the elements that make up a social class? Too the question of whether or not class is relevant anymore with regards to the contemporary societies in which we live. The classical approaches of Marx and Weber and their criticisms will be discussed first, and then the theories relating to class of contemporary sociologists Giddens and Bourdieu In order to tackle the question of whether or not classical approaches are relevant to contemporary societies, we need to look at the ideas on class of Marx and Weber. Karl Marx was a late 19th Century thinker.
Explain the viewpoints of classical and Keynesian economists. How did the economy that existed at the time of these theories influence them? Which theory is more appropriate for the economy today? Why? Explain the viewpoints of classical and Keynesian economists.
He believed in the concept of comparative advantage, the idea of nations to specialize in specific industries and trade with other nations for products not produced nationally. (David Ricardo) Comparative advantage is the foundation of industrialization as a means for globalisation. Classical economics was very much in fashion till the early 20th century with the advent of the Great Depression. John Maynard Keynes, a British economist, was the founder of Keynesian economics and the concept was first published in Keynes' book The General theory of Employment, Interest, and Money published during the Great Depression. (Keynesian Economics) Keynes attempted to explain the causes of the Great Depression, and how to to deal with the recession.
KEYNESIAN ECONOMICS. 1. What was the significance of the Great Depression of the 1930’s? The prolonged period of high unemployment and recessions of the 1930’s was thought not to be possible by Neo-classical economists and that a self correcting and self regulating economy would bring the labour market back into equilibrium at full employment due to wage and price flexibility. This did not happen.
Describe and compare the policies of mercantilism and laissez-faire. Mercantilism versus Laissez-Faire Mercantilism was a method of controlling profit in which the industry and trade were a means of strengthening the state rather than the individual. Laissez-faire was a (phrase coined by LeGendre), in economics, is a free market. "Free" in the sense that the government cannot intervene using taxes, or regulating minimum wage. In the beginning stages the European economic theory, mercantilism, was always in conflict with laissez-faire policy.
Wealth and Poverty, written by George Gilder, is a depiction on how to increase wealth and curtail poverty. Gilder argues thoroughly throughout the book that society has been misled by popular economic theory and by general culture attitudes into only having a small percentage of wealthy people and having the majority of people in society living in poverty. He documents the ways in which the blighting of incentive has crippled productivity in society and shows how the essence of capitalism is not greed but giving by investing money and energy. Gilder states that the “golden rule” of economics is the idea that the good fortune of others is also finally ones own. The scientific basis of the golden rule is in the mutuality of gains from trade, in the demand, generated by the engines of supply, in the expanded opportunity created by growth, in the usual and still growing economic futility of war (Gilder, 9).
One fallacy is that trade is a zero sum activity, if one trading party gains, the other must lost. 2. Imports reduce employment and act as a drag on the economy, while exports promote growth and employment. This fallacy stems from a failure to consider the link between imports and exports. 3.
Also, political events affect social policy; past examples include the World Wars and the elections of certain prime ministers. Ideologically, social welfare was influenced initially by the Fabian Society, established in 1884, which “challenged conservative political assumptions that economic markets could meet the welfares of all” which in turn, influenced the Royal Commission’s review of the Poor Laws, then, the establishment of the London School of Economics (LSE) (Alcock, 2008a). However, from “1970s onwards, the focus of social policy began to move beyond the narrow confines of Fabian welfare-statism” (Alcock, 2008a). Finally, the economic context of a country inevitably influences the development of its social policy. For instance, the New Left and New Right, which began to form in the 1970s, often focused on the economy when analysing state welfare and what's more, at this very moment the debate over state welfare and benefits is intense due to the current economical climate.
Therefore, the equilibrium rate of growth is given by matching proportionate change in output with the ratio of savings-output to that of capital-output. This sustains the economy along some warranted steady growth path. According to the model, temporary deviations from the warranted growth path would not be self-correcting. Because of the lack of self-correcting forces within the dynamics of the model, it is said to be characterized by ‘knife-edge instability’. That is, market-regulated growth espoused by the model is unstable and, thus, necessitates government intervention.