A Study of Keynesian Economics - 1073 Words

Which fiscal policies might activist Keynesian economists recommend to help a depressed economy regain full employment? Explain how they work. Keynes and Keynesian economists propose two large categories of measures to help a depressed economy regain full employment. These are either monetary measures or fiscal measures. Monetary measures rely on the decrease of interest rates and the reasoning behind this approach is as follows. The individual in an economy has two basic option of utilizing his cash: save or consume/invest. If the interest rates are higher, then the individual is more like to save than invest, because his return on investment (namely, on his savings) is bigger than if the interest rates are lower. With this in mind, the individual will spend more, purchase more products and services, invest perhaps in businesses etc. All these actions will induce the economic actors to match the increasing aggregate demand on the market with a higher aggregate supply. Companies and production outlets will have an additional incentive to produce and sell more on the market, since the market is more active in purchasing the products and services that they sell. In turn, in order to reach higher levels of production, the companies and firms need to hire more employees. The unemployment levels will decrease overall in the economy, since this is an aggregate phenomenon. The eventual theoretical conclusion should be that the economy will aim towards full employment, underShow MoreRelatedClassical Economics And Keynesian Economics1124 Words   |  5 PagesClassical Economics and Keynesian Economics has given me the opportunity to form an opinion on this greatly debated topic in economics. After researching this topic in great lengths, I have determined the Keynesian Economics far exceeds greatness for America compared to that of Classical Economics. I will begin my paper by first addressing my understanding of both economic theories, I will then compare and contrast both theories, and end my paper with my opinions on why I believe Keynesian Economics isRead MoreMacroeconomic Theories Of Macroeconomics And Classical Economics999 Words   |  4 Pagesis a branch of economics dealing with the performance, structure, behavior, and decision-making of an economy as a whole, rather than individual markets. This includes national, regional, and global economies. With microeconomics, macroeconomics is one of the two most general fields in economics. There are two major macroeconomic theories that economists use to describe the economy. Those theories are Keynesian and Classical. Each theory has a different approach to the economic study of monetary policiesRead MorePost-Keynesian Economic Essay1317 Words   |  6 Pages Post-Keynesian economic was formed and developed by economists such as Joan Robinson and Nicholas Kaldor who believed Keynesian economics was based on disequilibrium and uncertainty, and that challenges the general equilibrium assumptions of neo-classical theory. The main aim of post-Keynesian economics is to complete the unfinished Keynesian revolution. Post-Keynesian economists fundamentally used ideas from Keynes and his concept of effective demand, Marxist economist Michael Kalecki to provideRead MoreEconomic Studies: Quantitative and Qualitative Analysis793 Words   |  3 PagesEconomics studies many different things such as how governments, firms, individuals, and nations make decisions on distributing limited assets to fulfill their unlimited wants. It is broken down into two categories, macroeconomics, and microeconomics. Macroeconomics focuses on the behavior of the economy while microeconomics focuses on and individual as a consumer. Economics also focuses on two different studies known as quantitative and qualitative analysis in which they focus on the distributionRead MoreKayne vs Hayek1370 Words   |  6 Pagesbranch of economics dealing with the performance, structure, behavior, and decision-making of the whole economy. Macroeconomists study aggregated indicators such as GDP, unemployment rates, and price indices to understand how the whole economy functions. They develop models that explain the relationship between such factors as national income, output, consumption, unemployment, inflation, savings, investment, international trade and international finance. The two major theories of economics are ClassicalRead MoreNew Classical Macroeconomics Arose From The Monetarism And Rational Expectation School Essay922 Words   |  4 Pagesand follows the tradition of classical economics. If the market mechanism is allowed to play its role spontaneously, which could solve the unemployment, recession and a series of macroeconomic issues. Keynesian economists believe that changes in the money supply will lead to changes in effective demand that will changes in the total economy. For economic cycle fluctuation, Keynesian economists believe that is a disequilibrium phenomenon. In 1960s, Keynesian economists appealed to the Phillips curveRead MoreBiography of John Maynard Keynes Essay990 Words   |  4 PagesThroughout the history of economics, there have been many experts and professors whose ideas and theories have fundamentally affected our thoughts and practices, but none has been as influential on this subject as John Maynard Keynes. He was a B ritish economist who revolutionized economic thinking and to this day his work continues to be appreciated and utilized by many into what is known as â€Å"Keynesian Economics.† John Maynard Keynes was an Englishman born in 1883, who went on to become one of theRead MoreIntroduction. The Rising Unemployment Has Generated Challenges1381 Words   |  6 Pagesimpacts on the communities and economic growth of the country. The prevalence of high unemployment rates in low income communities in the U.S contributes to increased poverty rates, leads to development of social unrest and conflicts, and hinders effective flow of liquidity thus limiting labor mobility (Phelps Zoega, 2002). This paper seeks to study on the effects of the rising unemployment in low income communities using the theories of economics. Theories of Economics Explaining the Effects of RisingRead MoreThe Impact Of Classical Economics On The United States1052 Words   |  5 PagesThe United States has always faced its fair share of economic ups and downs. Financial upturns can quickly lead to downswings, and there have been plenty of theorists who believe they can solve the great divide. No one ever plans for a recession to last more than a few months, let alone watch the economy crumble into a deep depression. How can this happen, when the economy is supposed to be able to self-correct itself as one theory suggests? Moreover, when self-correction does not triumph, doesRead MoreThe Inflation Definition And Influences Essay1649 Words   |  7 Pagesresult in the social and economic disorder and can negatively impact the development of the economy. However, within a certain period of time, moderate inflation can stimulate consumption, expand domestic demand and promote economic development (Trevithick and Mulvey 19 96). For example, sometimes the government borrow money from the central bank to expand financial investment and take measures to ensure that the private sector investment is not reduced, which promote economic growth as a result of the