Preview

Keynesian Economics - a Continuing Process of Inflation, Governments Can Confiscate, Secretly and Unobserved, an Important Part of the Wealth of Their Citizens

Powerful Essays
Open Document
Open Document
1113 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Keynesian Economics - a Continuing Process of Inflation, Governments Can Confiscate, Secretly and Unobserved, an Important Part of the Wealth of Their Citizens
Keynesian Economics is an economic theorem based on the ideology of John Maynard Keynes in his publication ¡°General Theory of Employment, Interest, and Money¡± (1936). Keynesianism holds that a country should adopt expansive economy policy and enhance economy growth through increasing the aggregate demand. It often stressed on the theory of total spending in the economy (aggregate demand) and of its effects on output and inflation .

According to Keynesian Economics, the aggregate demand is influenced by a host of private or public economic decisions, and that it sometimes behaves erratically. Changes in aggregate demand, whether anticipated or unanticipated, have their greatest short-run impact on real output and employment, but not on prices. The Keynesians withhold that the macro economic trend tends to restrict specific individual behaviors. The Political Economics and Economics developed since late 18th century hold to increase economy production through stimulating more production, but Keynesians feels that the decrease on the aggregate demand is the main cause for the economic recession. From such point onwards, Keynesian theory and other theories that was build on the Keynesian¡¯s basis have been classified as part of the macroeconomics, which differs greatly from the microeconomics that focuses more on individual behaviors.

Keynes deemed that aggregate demand decides the level of production and employment. Aggregate demand is the total desired purchases of all the nation¡¯s buyers of final output . In the microeconomic, price, wages and interest rate will perform self-adjustment and such adjustment would result in the moving of aggregate demand towards full-employment level. However, such self-adjustment mechanism did not cause any effect because the key issue is whether insufficient demand exists. According to classical theory, insufficient demand is just a symptom of economy recession but not the cause, because in a normal operating market



Bibliography: 1. K. Alec Chrystal & Richard G. Lipsey (1997), ¡°Economics for Business and Management, New York: Oxford University Press. 2. Ricky W. Griffin, Michael W. Pustay (2005) ¡°International Business¡±, 4th Edition, and New Jersey: Pearson Education. 3. 3. Joseph E. Stiglitz (1997), ¡°Economics¡±, 2nd Edition, W.W. Norton & Company, Inc. 4. 4. K. Alec Chrystal & Richard G. Lipsey (1997), ¡°Economics for Business and Management, New York: Oxford University Press. 5. 11. www.econlib.org/library/Enc/KeynesianEconoimcs.html 6. 14. www.nobelprize.org/economics/laureates/1991/press.html 7. 15. www.nobelprize.org/economics/laureates/1974/presentation-speech.html

You May Also Find These Documents Helpful

  • Good Essays

    Egt Task 309.1.2-08, 09

    • 2481 Words
    • 10 Pages

    References: McConnell, C. R., & Brue, S. L., Flynn, S. (2012). Economics (19th edition). New York, NY: McGraw-Hill.…

    • 2481 Words
    • 10 Pages
    Good Essays
  • Better Essays

    References: Colander, D.C. (2010). Economics (8th ed.). Retrieved from The University of Phoenix eBook Collection database…

    • 1277 Words
    • 6 Pages
    Better Essays
  • Satisfactory Essays

    Egt1 Task 1

    • 406 Words
    • 2 Pages

    References: McConnell, C. R., Brue, S. L., & Flynn, S. M. (2012). Economics: principles, problems, and policies. New York: McGraw-Hill.…

    • 406 Words
    • 2 Pages
    Satisfactory Essays
  • Satisfactory Essays

    References: McConnell, C. R., Brue, S. L., & Flynn S. M. (2009). Economics: Principles, Problems, and Policies (18th ed.). New York, NY: McGraw-Hill/Irwin.…

    • 530 Words
    • 2 Pages
    Satisfactory Essays
  • Good Essays

    Econ 204

    • 612 Words
    • 3 Pages

    References: Gwarty, J., Stroup, R., Sobel, R. & Macpherson, D. (2002). Economics (Private and Public…

    • 612 Words
    • 3 Pages
    Good Essays
  • Better Essays

    Egt 1 Task 309.1.3-06

    • 1003 Words
    • 5 Pages

    References: McConnell, C., Brue, S., Flynn, S., & et al, S. (2011).Economics. (19e ed.). New York: McGraw-Hill%2FIrwin.…

    • 1003 Words
    • 5 Pages
    Better Essays
  • Good Essays

    References: Colander, D. C. (2013). Microeconomics (9th ed.). Retrieved from The University of Phoenix eBook Collection database.…

    • 824 Words
    • 3 Pages
    Good Essays
  • Good Essays

    Macroeconomics is the study of the economy as whole (Colander, 2013, p. 5). It considers the problems of inflation; unemployment, business cycles, and growth (Colander, 2013, p. 5). Inflation is a general increase in prices and fall in the purchasing value of money. Unemployment rate refers to the number of people actively looking for a job but unable to find one (Colander, 2013, p. 5). Business cycle is a cycle or series of cycles of economic expansion and contraction (Colander, 2013, p. 5). Economist analyzes each of these factors to determine the state of the economy. We live in an environment that is constantly changing. There are a number of factors, behaviors and trends that affect the economy. One event can caused a domino effect. This paper will outline how scenarios such as purchasing groceries, massive layoffs, and a decrease in taxes affects government, households, and businesses.…

    • 739 Words
    • 3 Pages
    Good Essays
  • Good Essays

    As it stands currently the existing effect of the economic factors on aggregate demand and supply are: unemployment, consumer income, and interest rates. In this paper we identify the existing effect of the economic factors on aggregate demand and supply. The American people have little to no income when unemployed, this in turn causes a decrease in demand for the economy. This type of event causes the aggregate demand to curve to the left. One of the main reasons unemployment remains high to this day is the lack of demand. A shortfall in aggregate demand is precisely the type of issue that can be addressed by monetary policy, however, to do so we need continuous monetary stimulus to progress toward maximum employment stability. The crash of the housing market has set tremendous limitation on consumer and their spending. Sternness on behalf of the government to a certain extent has decreased aggregate demand during this recovery period. These actions have directly impacted growth. What this means to us is that lower government spending and higher taxes call for disposable income for consumers, work for government contractors diminishing, and a decrease in government payroll. Another factor that has had great effect and impact are the levels of uncertainty. The events leading to this state have yet to be resolved which in turn have caused a lack of willingness and confidence within consumers. In the beginning the levels of uncertainty reflected the force of influence the recession had on us as consumers. This is something that had not been experienced in several years which made it difficult for us to handle or even find a way to get by in a more successful demeanor. After extensive research and analysis it is safe to say the supply-side considerations explain some of the rise in unemployment, which once again confirm the lack of demand as well as the…

    • 418 Words
    • 2 Pages
    Good Essays
  • Better Essays

    Walmart Economic Forces

    • 1300 Words
    • 6 Pages

    References: McConnell, C. R., Brue, S. L., & Flynn, S. M. (2009). Economics (18th ed.). New York, NY: McGraw-Hill/Irwin.…

    • 1300 Words
    • 6 Pages
    Better Essays
  • Satisfactory Essays

    Keynesian economics says that economic output is strongly influenced by aggregate demand. Keynes thought that the private economy was the thing that was preventing a return to prosperity. When people save their money he says that there’s no guarantee that the money “will find their way into investment in new capital construction.” They say that a lack of confidence is the reason they don’t invest. So Keynes claims that “the public interest in present conditions doesn’t point towards private economy”; they then conclude that we should endorse public spending in order to offset unwise private thrift. Because of this, Keynesian economics promotes a mixed economy. Keynes also that economic output is strongly influenced by aggregate demand. Keynes solution to stimulate the economy was a combination of two approaches; one reduce interest rates, and two have the government invest in infrastructure. By reducing the interest rates that the central banks lends money to commercial bank, this will encourage these banks to do the same for their customers, which would then encourage the customers to take out more money and put it back into the economy. He wanted the government to invest infrastructure because if they did it would create business opportunities.…

    • 617 Words
    • 3 Pages
    Satisfactory Essays
  • Satisfactory Essays

    The American government manages the overall pace of economic activity and looks to sustain high employment levels and stability in prices. In order to achieve these goals the government uses Fiscal and Monetary policy. Fiscal policy is used to determine the appropriate level of spending and taxes, whereas monetary policy manages the supply of money in the economy. When the economy enters a recession, governments stimulate it with deficit spending, whereas during an economic growth governments control it with higher taxes to achieve a surplus. These policies are based on the concepts of British economist John Maynard Keynes (1883-1946). Consumers mainly influence fiscal policy by their spending habits. For instance, if they become concerned about the economy they will save more and spend less, which will result in less production, increase in unemployment level and an overall lower spending rate. In general, the power is held by the consumer. If we become more reasonable with our spending, saving and investing for the better, this would positively impact our economy. (Brooks)…

    • 462 Words
    • 2 Pages
    Satisfactory Essays
  • Good Essays

    Keynes and Hayek

    • 332 Words
    • 2 Pages

    John Maynard Keynes was an economist whose ideas have greatly affected the theory and practice of modern macroeconomics, and informed the economic policies of governments. He built on and greatly advanced earlier work on the causes of business cycles, and is widely considered to be one of the founders of modern macroeconomics and the most influential economist of the 20th century. His ideas are the basis for the school of thought known as Keynesian economics, as well as its various offshoots.…

    • 332 Words
    • 2 Pages
    Good Essays
  • Powerful Essays

    Welch, P.J & Welch G.F., 2010, Economics Theory & Practice, 9th edn, John Wiley & Sons, Inc, United States of America.…

    • 4001 Words
    • 17 Pages
    Powerful Essays
  • Good Essays

    interfere in the economy to balance it out when needed. For example, a public entity…

    • 584 Words
    • 3 Pages
    Good Essays