Keynesian Economics

Examples of Keynesian Economics in the following topics:

• Stability Through Fiscal Policy

  • Governments can use fiscal policy as a means of influencing economic variables in pursuit of policy objectives.
  • Keynesian economics suggests that increasing government spending and decreasing tax rates are the best ways to stimulate aggregate demand, and decreasing spending and increasing taxes after the economic boom begins.
  • Keynesians argue that this method may be used in times of recession or low economic activity as an essential tool for building the framework for strong economic growth and working towards full employment.
  • Keynesian theory posits that removing spending from the economy will reduce levels of aggregate demand and contract the economy, thus stabilizing prices.
  • Some classical and neoclassical economists argue that crowding out completely negates any fiscal stimulus; this is known as the Treasury View, which Keynesian economics rejects.

• Mixed Economies

  • Under its influence, France experienced what is called Thirty Glorious Years of profound economic growth.
  • Profit-seeking enterprises and the accumulation of capital would remain the fundamental driving force behind economic activity.
  • Keynesian economics advocates a mixed economy — predominantly private sector, but with a significant role of government and public sector.
  • It also served as the economic model during the later part of the Great Depression, World War II, and the post-war economic expansion (1945–1973), though it lost some influence following the tax surcharge in 1968 and the stagflation of the 1970s.
  • The advent of the global financial crisis in 2008 has caused a resurgence in Keynesian thought.

• The Business Cycle

  • The term business cycle (or economic cycle) refers to economy-wide fluctuations in production or economic activity over several months or years.
  • The first systematic exposition of periodic economic crises, in opposition to the existing theory of economic equilibrium, was the 1819 Nouveaux principes d'économie politique by Jean Charles Léonard de Sismondi.
  • This work did not generate interest among classical economists, although underconsumption theory developed as a heterodox branch in economics until being systematized in Keynesian economics in the 1930s.
  • In recent years, economic theory has moved towards the study of economic fluctuation rather than the study of business cycles.
  • Much economic theory also holds that the economy is usually at or close to equilibrium.

• Control of the Money Supply

  • Commercial bank behavior, ultimately regulated by the nation's central banking institution, and in conjunction with consumer demand define the total stock of money, bank credit, and rates of interest which shape national economic conditions.
  • The Keynesian side points to a major example of ineffectiveness of open market operations encountered in 2008 in the United States, when short-term interest rates went as low as they could go in nominal terms, so that no more monetary stimulus could occur.
  • This is why they advocated a non-interventionist approach—one of targeting a pre-specified path for the money supply independent of current economic conditions— even though in practice this might involve regular intervention with open market operations (or other monetary-policy tools) to keep the money supply on target.

• Entrepreneurship and the Economy

  • The accumulation of factors of production per se does not explain economic development.
  • Early economic theory, however did not pay proper attention to the entrepreneur.
  • The article was a prod to the economics profession to attend to this neglected factor.
  • Equilibrium models are central to mainstream economics, and exclude entrepreneurship.
  • The supposition that entrepreneurship leads to economic growth is an interpretation of the residual in endogenous growth theory and as such is hotly debated in academic economics.

• Economic Systems

  • A country's economic system is made up of institutions and decision-making structures that determine economic activity.
  • An economic system is the combination of the various agencies and entities that provide the economic structure that defines the social community.
  • An economic system may involve production, allocation of economic inputs, distribution of economic outputs, landlords and land availability, households (earnings and expenditure consumption of goods and services in an economy), financial institutions, firms, and the government.
  • Alternatively, an economic system is the set of principles by which problems of economics are addressed, such as the economic problem of scarcity through allocation of finite productive resources.
  • Today the world largely operates under a global economic system based on the free market mode of production.

• Economic Indicators

  • The National Bureau of Economic Research analyzes and interprets many different trends in economic indicators, including GDP (gross domestic product), to identify business cycle dates.
  • An economic indicator is a statistic that provides valuable information about the economy.
  • One application of economic indicators is the study of business cycles.
  • Other producers of economic indicators includes the United States Census Bureau and United States Bureau of Economic Analysis.
  • Identify the major economic indicators and what economic factors they measure

• The economic environment

  • A nation's economic situation represents its current and potential capacity to produce goods and services.
  • The key to understanding market opportunities lies in the evaluation of the stage of a nation's economic growth.
  • A way of classifying the economic growth of countries is to divide them into three groups: (a) industrialized, (b) developing, and (c) less-developed nations.
  • As the degree of economic development increases, so does the sophistication of the marketing effort focused on the countries.

• Growth Economics

  • In economics, "economic growth" or "economic growth theory" typically refers to growth of potential output, i.e., production at "full employment," which is caused by growth in aggregate demand or observed output.
  • As an example of measuring economic growth, a country that creates $9,000,000,000 in goods and services in 2010 and then creates $9,090,000,000 in 2011 has a nominal economic growth rate of 1% for 2011.
  • Inflation and Deflation can make it difficult to measure economic growth
  • Inflation or deflation can make it difficult to measure economic growth.
  • Break down the measure of economic growth and the contributing factors behind it

• The Asia-Pacific Economic Cooperation

  • APEC is a forum for 21 Pacific Rim countries that seeks to promote free trade and economic cooperation throughout the Asia-Pacific region.
  • The Asia-Pacific Economic Cooperation (APEC) is a forum for 21 Pacific Rim countries (formally Member Economies) that seeks to promote free trade and economic cooperation throughout the Asia-Pacific region.
  • Established in 1989 in response to the growing interdependence of Asia-Pacific economies and the advent of regional economic blocs (such as the European Union) in other parts of the world, APEC works to raise living standards and education levels through sustainable economic growth and to foster a sense of community and an appreciation of shared interests among Asia-Pacific countries.
  • Since 2006, the APEC Business Advisory Council, promoting the theory that a free trade area has the best chance of converging the member nations and ensuring stable economic growth under free trade, has lobbied for the creation of a high-level task force to study and develop a plan for a free trade area.
  • Explain the role The Asia-Pacific Economic Cooperation (APEC ) plays in ensuring free trade