As aggregate demand affects the supply (production, employment and inflation) they saw it as the government's role to build it back up using monetary and fiscal policies. Similar to Classical economists, Keynesian believe the economy comprises the same part: consumer spending, government spending, and business investments. However the major difference is that Keynesians believed government spending could help account for the lack of consumer spending and investment. The Keynesian theory also was based on the idea that wages and prices were sticky and that is would give aggregate supply a horizontal line in the short run. Overall, the main idea of the Keynesian Economist was to save and create jobs and
First, he explains that the so-called “poverty trap” is not the cause of poor nations’ slow or nonexistent growth, despite the claims of foreign aid organizations. Easterly argues instead that bad governments and their interference with their economies may be the reason for many countries’ slow growth. To fix this problem, many aid organizations attempt to assist poor nations by restructuring their economic institutions from the top down. However, Easterly claims that these attempts have shown to be futile time and time again. He argues that this is because restructuring an entire economy from the top down is almost always bound to fail.
I only found some things, like meeting short-term goals and buying-back shares of shareholders, that can have influence on economic growth. In the share buy-back article (The Economist, 2014) is only stated that “They worry…will damage…the economy.” and they don’t come up with hard evidence. In the studies about monitoring and controlling managers of firms, they found evidence that not monitoring will lead to an incentive for managers to shrink (Jensen and Meckling, 1976). Also the compensation of managers will be higher when they are not controlled by institutional investors (Hartzell and Starks, 2003). This means that without monitoring and controlling by institutional investors, there is an agency problem which can lead to maximizing personal wealth of managers instead of maximizing value of the firm.
ECONOMICAL FACTORS Economic environment refers to those economic factors which have impact on the working of business viz. Economic system, economic policy, nature of economy, trade cycles, economic resources, level of income, distribution of income and wealth, economic legislation, etc. Economic environment of business is very complex in nature. It is very dynamic. It keeps on changing with change in government policies, change in political situations etc.
If there is government interference, it means that there is no free market anymore. When government participates in an economy, it will regulate many policies to control privates’ productivities and economic system. Truthfully, there are no others who can respond to consumers’ demand as good as producers, so their decision without any control from government is the best (Economicshelp). Furthermore, the presence of government usually comes together with a fiscal policy. It influences on aggregate demand directly (Fundamentalfinance).
The level of the share trading system is a key variable which shows the beat of monetary movement in a nation and together with different variables, for example, the genuine Gross Domestic Product, the unemployment rate, the expansion rate, the loan fee and the conversion standard give an outline of the macro economy. Stock costs have additionally been known not rather generally, prompting worries about conceivable "air pockets" or different deviations of stock costs from essential values that might
This study attempts to link psychological research, empirical evidence, and asset-pricing theory to examine how investor sentiment affects financial market volatility. We provide insight into that question by exploring different parameter configurations using the general equilibrium model of Lucas . The Lucas model is the most influential asset-pricing model and has been of central importance to modern macroeconomics. Traditional economic analyses are based on the efficient markets hypothesis (EMH), which assumes that people price assets by measuring probability and using all available information, and hence leave little room for investor sentiment. As behavior is motivated by both thoughts and feelings, considering investor sentiment
Foreign exchange is significant in many different parts of the economy. It is mainly used in international trade and debt servicing. It is also important in the insurance industry because there are plans, such as multi-currency plans, which are designed with benefits and premiums define in terms of different currencies. Also, investment banks and multinational companies loan and/or invest part of their capital in terms of the foreign currency (BSP, 2008). Foreign exchange rate is complex and hence it is heavily studied in international macroeconomics.
Such beliefs are what makes Monetarists emphasize the importance of managing the amount of money in supply intentionally meant to keep inflation low. Regardless of monetarists concerns over the two, the majority would advocate for reducing inflation rather than keeping unemployment low (Fand, 2013). Finally, the concept stresses on the role of regular rate of unemployment. This, however, is not to meant that the concept is universally accepted. Numerous economists question the classical form of monetarism and instead give an alternative to what they presume would serve countries well.
Social Science and Economics Scarcity affects the choices made by governments and individuals Scarcity in governments can be categorized into two groups; limited resources and unlimited wants or needs. Unlimited wants and needs is part of the basic human existence. It means that people are never satisfied with what they have .Unlimited wants is one of the problems that affect human beings while the other problem is limited needs. These two factors have been considered as a motivating factor in improving the livelihoods of individuals. They also affect the choices that are made by governments and individuals.