UK's Macro Economic Situation in the Last Five Years - Coursework Example

Download file to see previous pages Economics is the science of wealth creation and it involves the formulation of theories that are debated and tested leading to some being accepted, rejected, or modified. They all involve the question of what to produce using scarce resources, how to ensure stable prices with full employment, and how to ensure and provide a raising living standard for the people today and tomorrow. ( Sloman 2010)
John Keynes was (1883-1946) was a British economist whose ideas greatly impacted modern-day macroeconomics with an effect on the British social liberals. In 1936 he broke from the classical theory of economics with the publication of the General Theory of Employment, Interest, and Money that advocated for interventionist policies by the government. The main tool by which the government will intervene included the fiscal and monetary policy to mitigate the adverse effects of capitalism that is a recession, depression, and business cycles. His theories are what is known as the Keynesian theory of economics. The classical view held that in a recession that wages and salaries would decline to restore full employment, but Keynes held that the opposite was true. Falling prices and wages depress people's incomes thus preventing a revival of spending. Keynes insisted that direct government spending was necessary to increase spending. In his theory, one person's spending goes towards other earnings thus when he/she is spending her money she/he is infected supporting another’s earning and the circle continues and this is what helps and supports the normal function of an economy. When depression hits, people hoard money and this action deprives the economy of money in circulation making it to be at a standstill. These ‘crunch’ can be best corrected by the government intervention so as to increase spending; by increasing money supply or by buying things on the market itself.   ...Download file to see next pagesRead More