StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...

Introduction to Macroeconomics - Essay Example

Comments (0) Cite this document
Summary
In the essay 'Introduction to Macroeconomics' on macroeconomics, the following points are considered: in a closed economy, goods can be at market equilibrium yet large degree of unemployment, Keynes’ proposed solution: monetary and fiscal policy for cyclical unemployment. problems and limitation of Keynes’ proposed solution…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER94.2% of users find it useful
Introduction to Macroeconomics
Read TextPreview

Extract of sample "Introduction to Macroeconomics"

Download file to see previous pages However, during recessions, when the unemployment rate rises, the demand will still be met by the supply, although the demand level will be lower. This is why in the goods market prices and quantity will settle at the equilibrium but high unemployment can still be present in the economy. This has been termed as the “Keynesian unemployment”.
As what has been described earlier, in determining output to meet the demands, there are two views—the Keynesian and the classical view. The classical view argues that prices and wages are flexible, in such a way that excesses in either demand or supply will quickly be absorbed by the economy and resume full employment of resources after economic shocks—or abrupt changes in the aggregate demand and supply curves. The Keynesian view on the other hand argues, as apparent in its sticky theory of prices and wages which says that these two factors are sticky in the short run because of contractual rigidities such as agreements made with different interest groups such as the labor unions. In the latter situation, the one proposed by Keynes, higher levels of aggregate demands are needed for output to respond positively because the aggregate supply curve is relatively flat especially when output levels are low. In this situation, the economy can have long periods of unemployment because prices and wages are slow to adjust to shocks, and reaching full employment of resources is slow to reach.
When classical economists argue that unemployment results from the interaction of the labor demand and supply curves, and lowering the wages will spread the labor supply which can curb unemployment in the process, Keynes argues that such is not applicable when unemployment is due to business cycle downturns, when because of lower demands of products in the economy, demand for labor is also low.
The lower demand for goods results in lower demands for labor.  ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(Introduction to Macroeconomics Essay Example | Topics and Well Written Essays - 1500 words, n.d.)
Introduction to Macroeconomics Essay Example | Topics and Well Written Essays - 1500 words. https://studentshare.org/macro-microeconomics/1547979-introduction-to-macroeconomics
(Introduction to Macroeconomics Essay Example | Topics and Well Written Essays - 1500 Words)
Introduction to Macroeconomics Essay Example | Topics and Well Written Essays - 1500 Words. https://studentshare.org/macro-microeconomics/1547979-introduction-to-macroeconomics.
“Introduction to Macroeconomics Essay Example | Topics and Well Written Essays - 1500 Words”. https://studentshare.org/macro-microeconomics/1547979-introduction-to-macroeconomics.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Introduction to Macroeconomics

Macroeconomics

...Introduction to Macroeconomics... Introduction to Macroeconomics... Macroeconomics The article selected for the project is “Do Tax Cuts Leads to Economic Growth” (Leonhardt, . The article is focused on the US economy and described about the impacts of tax cuts on the economic growth. The article is written in technical language of economics and it seems that the author has conducted an in depth analysis on the US Economy. Following is the evaluation of the article. 1. Principles of Economics & US Tax Cuts The article has beautifully covered the different economic indicators along with their projected movements on the basis of the proposed strategy by the current Govt. The author has identified, as well as, analyzed the impact of tax cuts by...
10 Pages(2500 words)Essay

Macroeconomics

...Introduction to Macroeconomics... vis-a-vis Keynes Perhaps two of the most contrasting economist whose economic supposition is in almost diametric opposition against each otheris Friedrich August Hayek and John Maynard Keynes. Hayek was a stout defender of free market and classical liberal idea and against centralized planning and socialist economies while Keynes was for modern liberalism and espoused government intervention in a given economy to lift it from economic depression. Hayek totally abhorred collectivism believing that such structure can only be maintained by a centralized authority which could subsequently lead into totalitarianism. He believes that it is only free market, in contrast to a socialist or mixed economy, can...
2 Pages(500 words)Essay

Introduction to Macroeconomics

...? Introduction to Macroeconomics A) Why is it considered necessary to control the rate of inflation? It is necessary to control the rate of inflationfor its several harmful effects as described in the following paragraphs (Parkin, 2010). Impact on Purchasing Power With the inflation rate gyrating upwards, real wages of the person fall leading to reduced purchasing power. Everyone is not protected in the market with cost-of-living increase, especially workers in an unorganized sector. Many workers earn their subsistence on fixed incomes because of either no or very less bargaining power; they cannot ask for a proportional increase in their wages that can match the inflation and thus, they are harmed most due to inflationary pressure...
4 Pages(1000 words)Case Study

Macroeconomics

...Introduction to Macroeconomics... Macroeconomics Macroeconomic factors such as unemployment rate and inflation play a pivotal role in the national economy of the country. Rapid inflation takes away the benefit of rising GDP or in other words brings down the real GDP growth rate and thereby real income of the people. Similarly, high unemployment rate does not augur well for the economy as it tends to raise the income disparity among the people. The paper attempts to explore how unemployment and inflation can be tamed through policy matters. The US has experienced high unemployment and high inflation rates in the past. Both are equally bad for the national economy. Current GDP, Inflation and Unemployment Rate The US GDP in year 2012 is...
4 Pages(1000 words)Essay

Macroeconomics

...Introduction to Macroeconomics... To which extent can we count on emerging countries to boost the world economy? At present, the global economy cannotrely on the emerging countries to improve the world’s economy. In the last two years, developed countries have witnessed serious financial instability, and are at present trying to tackle the problem of a widening sovereign-debt and unemployment crisis. However, emerging countries, which were considered vulnerable are exhibiting a remarkable resiliency, and growth seems to point to the pre-2008 breakout levels. In essence, the performance exhibited by the emerging countries is viewed as a significant engine of expansion in regard to the present global economy (Lachman 64). Conversely, a major...
3 Pages(750 words)Assignment

Introduction to Macroeconomics - Gross Domestic Product

...Running Head: Introduction to Macroeconomics Introduction to Macroeconomics This paper examines the relevance of GrossDomestic Product as a metric for measuring the economic well being of the present days economies. The paper explains the different types of GDP's and their differences. Later it discusses the shortcomings of GDP as a economic and social indicator and the alternatives available to it. Introduction Gross domestic product can be defined as a measure of the market value of all final goods and services produced by a country in a given time frame. It has always been considered an important indicator of economic activity. The GDP is estimated by three distinct theoretical approaches... Head:...
7 Pages(1750 words)Essay

Macroeconomics

...Introduction to Macroeconomics... paper examines one of the most important concepts in the field of economics, inflation. It covers in detail, and identifies the word ‘inflation’, and gives a brief explanation of the types of inflation that are prevalent in the world. Furthermore, the most important causes of inflation are also discussed, along with its effects on the whole economy. Introduction Since 2007, the world has experienced a severe recession, and many of the world’s economies has witnessed their citizens being unemployed. Corporations are firing people and getting rid of workers. This has resulted in a decrease in production, and hence, the world’s Gross Domestic Product (GDP). Other problems such as the crash of the housing mark...
7 Pages(1750 words)Term Paper

Macroeconomics

...Introduction to Macroeconomics... Expansionary Fiscal Policy A reduction in the production and sale of oil implies that UAE risks having a reduced economic growth rate. This can however be controlled through the application of proper fiscal policy tools. In order to stabilize or enhance its economic growth, UAE, should follow the expansionary fiscal policy (Larch & Nogueira, 2009). This policy will lead to increase in demand in the market in order to enhance economic growth. The expansionary fiscal policy will consist of: A raise in the government spending for commodities Lowering of taxes A combination of the increased government spending and lowering of taxes The Expansionary Fiscal Policy should be used with the objective of stabilizing pr...
4 Pages(1000 words)Research Paper

The introduction to macroeconomics, bubbles, and investment behaviour in Part Three of the module, Bubbles and the economy

...Introduction to Macroeconomics... and Micro Economics Q1. (a) The national income accounting identity s that aggregate income earned in an economy is always equal to the aggregate expenditure (Rose, 2010). A closed economy is a hypothetical economic system that does not engage in any foreign trade. From the demand or expenditure side: Y (Total Income) = C (Consumption Expenditure) + I (Investment Expenditure) +G (Government Expenditure) When all accumulated resources in the market are utilized, the aggregate savings (S) becomes equal to aggregate investment (I). The government incurs expenditure for the public and in return earns taxable revenue (T). The case of the current assignment assumes that total government expenditure (G) is equal to ...
9 Pages(2250 words)Essay

Macroeconomics

...Introduction to Macroeconomics... and Sur The following figure shows a Withdrawls and an Injections function: a. How much is the nationalincome at the equilibrium The equilibrium point for the lines W and J is at point P. This is the point where the lines intersect. Therefore, the National Income based on the presented chart is a total of OB since W=J. b. Assume that the current level of national income is OA. Describe the process whereby equilibrium will be achieved. If national income level is OA, the equilibrium, in this case, will be achieved through an upward shift of the withdrawals curve, W given that the injections curve is horizontally fixed and inelastic along that line. This is an indication of the excess in the injections than the ...
1 Pages(250 words)Coursework
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Essay on topic Introduction to Macroeconomics for FREE!

Contact Us