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Macroeconomics: Theory and Policy - Assignment Example

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This paper "Macroeconomics: Theory and Policy" presents planning that is a useless endeavor because developments in e-business/e-commerce and in the political, economic and societal environments are moving too quickly nowadays. This paper analyses this statement and discusses why…
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Macroeconomics: Theory and Policy
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Download file to see previous pages They vouched for a strong government or stat power which can conquer more foreign lands and set up colonies in order to provide the traders vast market as well as protection against robberies and foreign attacks. This mercantile theory was strongly opposed by Adam Smith, who emphasized on the ‘invisible hand’ and ‘laissez-faire’. Smith was strongly against any kind of government intervention and believed it is the other name of evil. According to smith the free market mechanism of demand and supply should be encouraged and the government should only look after the law and peace of the country. Marshall followed by Ricardo, Mill, and others and such a proposition of Smith later. (Ackley 1961) All of them are reckoned as classical economists. The classical economic theory faced its first failure when the global community faced the Great Depression of 1930. At this point, the importance of government intervention was first felt and actually got established through the words of Keynes. From this point of time, the modern debate over planned and a market economy began between the Classicalists and the Keynesians which was later continued between the neo Keynesians and neo Classicalists. (Osadchaya, 1982; Froyen 2002)

The classical economists emphasized in the long run and believed that the market power will take every problem into consideration and resolve them as time passes by. However, Keynes said ‘in the long run we all dead’. Since the Keynesian emphasis was primarily on the short run, it was obvious that without any sort of government intervention, any adjustment or restoring the equilibrium through market mechanism would be impossible. (Osadchaya,1982).Before we start our in-depth analysis of the issue, whether ‘Planning is a useless endeavor, because developments in e-business/e-commerce and in the political, economic and societal environment are moving too quickly nowadays’, we should take into consideration what are the considerations which Keynesian model of the planned economy took into account. ...Download file to see next pages Read More
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