Essays on Keynesian Theory

The United States of America suffered great economic recessions like the bank panic and depression in the 1820s. Again, there were the hard economic times that came in late 1830. The most significant economic illness that was so dark and so long came in 1930. It is what is commonly referred to as the Great Depression (Eichengreen and Barry 200). The adverse economic problem varied across many nations, having started as early as 1929 in most of the nations. It had its roots in the US after a significant fall in the stock prices that began in the last ...

ARTICLE ANALYSIS

The article gives a detailed picture of the level of poverty in the United States. It depicts that almost ninety eight million (97.3) Americans fall in the category where they earn low income. These are in the category of earning from one hundred to two hundred (100-200) percentage of the poverty level. An extra forty nine million find themselves in the category of low-income earners. This gives one hundred and forty six (146.4) million, which is equivalent to forty-eight percent of the total American population. The figure has risen by four million in duration of three years. In the compiling ...

Keynesian economic theory recommends government manipulation of aggregated demand by rising spending, lowering taxes, and incurring debt during recession and pursuing the opposite policies during inflations”. Discuss the pros and cons associated with the Keynesian theory and how policy makers can improve upon the theory.Keynesian economic theory has suggested government involvement in modification of the aggregate demand by increasing spending, decreasing taxes and acquiring debt during recession and implementing the opposite during periods of inflation. There are several advantages and disadvantages associated with this recommendation of Keynes. The Keynesian theory allows higher employment even in the recessionary period. Considering ...

The Maastricht Treaty launched the European Monetary Union in the year 1992. The union comprised of two parts, which included the creation of euro the common currency and creation of the European Central Bank, which coordinates all monetary policies in the Eurozone. The treaty also created the rules for countries willing to join the union. The other element of the treaty was the national central banks of the 16 member countries. European Monetary Union creation has led to price stability and proper management of public finances (McKay Volz & Wolfinger 2011).The final phase of the single currency introduction ...

Relevance

The Consumption function’s stability stresses the importance of investment in the Keynesian theory of employment and income in the short run. It contradicts Say’s law with proof that consumption expenditure raises proportionately less than income increase; this results in a saving gap between income and consumption. The consumption function enabled provision of an explanation of the trade cycle’s difficulties (Ambrosi, 2007). The consumption function is fundamental in the Keynesian Theory of Investment multiplier and explaining the income propagation process in Keynes’s theory of income and employment (D’Orlando & Sanfilippo, 2010). The marginal propensity to consume (the ...

Introduction

Economic perspective and economic laws are some of the important ones that associated with different economies of the world accordingly (Casson, 1990). As per the sayings of Alfred Marshall and Adam Smith, the law of economics revolves specifically around the level of economic perspective of consuming and utilizing the money. In fact the core sayings of these individuals are in the favor of effectiveness and shows that economies should utilize their facts and the consumption and savings values in a perfect and organized manner (Casson, 2006). There are number of authors of economics which has had presented different ideas ...

Classical model of the economy has weaknesses that Keynes took advantage of to come up with the Keynesian model. In the classical view of the economy, the belief is that the market will always tend towards providing full employment and that people were satisfied with what the real world is described to be (Caporaso, 1992). However, this belief could not hold any water when the Great Depression started in the economy. It was at this time when economists wanted a more rational way of formulating economic policies. The operations of the market in the view classical theorists failed to sustain ...

Background

Economics is a branch of social science that focuses on studying how individual, households, and organizations work. These individuals are collectively coined as economic actors, agents, or players, as their collectively movements influence how the overall economy works. The study of economics also deal with how these economic players manage resource—especially natural resources which are considered to be scarce or limited; how they use, buy, and sell alternative commodities, all in an effort to arrive at their desired ends. An individual, one of the economic factors we have mentioned, may, for example, go to a supermarket to buy goods for ...

Introduction

Cost price squeeze is increasing of costs when market pressures like competition make it hard to increase commodity prices in order to cover for the escalating costs. In agriculture it involves increasing costs of inputs like seeds and fertilizers and the decrease of crop prices. The farmers end up paying more than they get due to the squeeze between prices and costs. Increase of costs in upstream can be caused by energy costs fluctuation, consolidation, and inflation. When fertilizer and seed companies consolidate, there are no low cost inputs for farmers to buy. Prices on the downstream can decline ...

In the past few years, many economies in the world have been affected by inflation. It is important to define inflation on the economic perspective in order to understand its phenomenon. Inflation is the general increase in the price level in the economy of a country (Joseph 3). There are various economic terms that are related to the issue of inflation. For instance, inflation may be brought about by an increase in the aggregate demand. Demand is the quantity of a product or a service a consumer is willing and able to buy at the existing market price at a given time period. ...

According to the macro-economic theory, there are several policies used to stabilize the economy of a country. The most common policies used to achieve this objective are the fiscal policy and the monetary policy. In economics, fiscal policy is involved in controlling the government expenditure. Applying it in stabilizing the economy of a country, it dictates government expenditure so as to stabilize the economy of the country. The main elements used to stabilize the economy are the government expenditure and revenue generation into the economy through taxation (en.wikipedia.org). Contrasted to the fiscal policy in stabilizing the economy is the monetary policy. ...

According to Professor Edith Kuiper, the history of economic thought deals with different theories and thinkers in a subject that became economics and political economy since the ancient days to present day. It involves many schools of economic thought. In the recent past, scholars such as Thomas Aquinas said that it was the obligation of many businesses to sell their products at reasonable prices. The earliest discussions of economics are in the ancient times, and from that time till the industrial revolution period, economics was not just a separate discipline but a part of the philosophy (Henderson, 28). Plato’s book ...

Evolution of Keynesian Theory in the US Economy

For the purpose of understanding the evolution of Keynesian Theory in the US economy, it is eminent to understand Keynesian economics. Keynesian economics is based on the ideas the English economist John Maynard Keynes. According to Keynesian economics, private sector decision leads to inefficient macroeconomics and thus argues actively in favor of policy made by the government, specially the actions by the central banks and the fiscal policy measures by the central government. Keynesian theory was more of a socialist one and fanatically defending the free markets as the same time. Keynesian economics warns against the practice of ...

Generally, during recession period, there are theories that are implemented to try and remedy the situation. The two major theories that have been utilized during the United States of America to try and save big businesses are: supply side economics and Keynesian theory. Arguments have been put across regarding the best theory that is capable of rescuing big businesses during the recession. According to Boskin, many have been in favor of Keynesian while others have been in favor of Supply-side. In this paper therefore, is going to investigate both theories arguing in favor of supply-side. This paper will also ...