Economics Essay

1. What did Keynes think near of the chief benefits and defects of capitalist economy were?Keynesian theory which was genuine by Keynes advocates for a mixed economy where the organisation and private sphere of influence ar important. In Keynesian role model economy is assumed to be below full meshing. Keynesian lay outs that the nitty-gritty demand for good which try out to increase involution of resources in the country is the driving force of an economy. concord to Keynes, the governments role is to downd unemployment rate and deflation level to raise increase output in an economy (Baqliano and Bertola, 2003).Capitalism developed by Max argues that the poor in capitalistic society are so beca practice of exploitation by the merchants who own the doer of production and distribution. The merchants are say to exploit the poor finished low wages. Marx argued that the value of any economic good should be determined by the labor used to manufacture. whatsoever cost tha t is extravagantlyer than the cost of labor represents the surplus which is the acquire the capitalists put one across from exploitation of their laborers. Marx believes that all means of production should be owned by the government or should control by the government. Marx advocated for socialist government that owns the means of production or democratic administration that control them.Economists who include Keynes abandon the claims of Marx that labor is the besides measure for surplus. According to Keynes who support capitalism, employers and employees are manoeuvre by the prevailing marketplace wages hence employers offer employment to allowing workers.John Keynes believes in capitalistic economy and cal direct on the government to stimulate it but not eliminate it. However, Keynes site defect in capitalism where he argues that capitalism does not promote full employment, riches and incomes which the model seeks to achieve in the long run.Keynesian ideologies have been apply by politician but both abuse of the model, inflation has resulted. This is unmingled with government manipulating policies to make economic conditions favorable during election which has led to mellowed inflation in most(prenominal) state. Action by government acquits to reduce real wages and real incomes which do comply with Keynes model. Capitalism has led to segregation of the society into strata according to income and wealth owned. Most politician use Keynes ideologies by making promises that will earn them votes. Implementations of the promises require higher gross which reduces income of individuals (Baqliano and Bertola, 2003).Keynesian advocate for full employment which should be accompanied debauch steady controlled inflation level as an effective means of directional the economy in he have-to doe withs of capital. Keynes argue that real wages bottomland be allowed to fall, government expenditure on schools, hospitals and infrastructure passel be rock-bo ttom as anti-inflationary measures and this inflationary measure should be continued until employment level desired is achieved.According to Keynes denied that unemployment is contributed by capitalism. However Keynes argued that unemployment in capitalism is brought by inadequate demand of personal articles of utilization and productive articles of consumption. Keynes argue that inadequate demand is as a result of the workers tending to gain part of their incomes through savings and the inadequate demand for productive consumption is brought by failure of people to invest their capital profitability which would lead to increase in output and hence reduced unemployment.Keynes advocates that employment can be increased by lowering real wages through inflation introduction and decreasing rate of interest. Increased rate of interest will encourage investment of capital which will increase aggregate demand. The government should then expand its compute to allow mass investment. consu mptive demand can be increased through increased frenzy of the ruling class investing in war prone regions and increased non-productive expenses by the state. The increased non-productive expenses to attain full employment of the population will actually lead to diminished living standards of laborers.Keynes in his support for capitalism argued that the workers should not be assisted to rise above the capitalists because capitalists who consist of intellectuals are the quality of life and they carry seed of achievement. Keynes argued against socialism where the government owns the production.Keynes in support of capitalism advocates the governments to support monopoly. The wage freezing policy by the federal government in Middle East helped increase the profits of the monopolies while lowering the living standards of the workers.Keynes argue that inflation bring astir(predicate) equilibrium position I n capitalism. In Capitalism blast lead to increased profits and hence increase d prices. Production expands up to overproduction point where equilibrium is achieved through boom bursting.2. What is the identification business in using econometric analysis?Identification problem in ecometrics involves solving unique values of the parameters of the structural model from the values of the parameters of the reduced form of the model. Reduced form of a model presents a model where endogenous variables are expressed functions of exogenous variables. For example prices in a marker are determined by supply and demand, hence essential establish the demand and supply functions. However, the equation obtained by regressing quantity on market price cannot be identified specifically as both supply or demand function. In special cases, we use reversal to get demand function. While holding supply function never-ending or vice versa, but cannot obtain regression while cooperative fluctuation changes in both (Baqliano and Bertola, 2003).Economics EssayThe three areas of economic science affect an individual both positively and nixly. First, in making decisions, a person often has to decide on tradeoffs because he/she just cannot bear to cloud everything that he/she needs. In other words, sacrifices must be made. Economics, aft(prenominal) all, is about allocating the resources available to a person which happens to be scarce most of the time. This would mean, for instance, that if one has set aside $10 dollars for chocolates and he/she involves to buy some oranges, the decision would often entail buying less chocolates to enable him/her to buy some oranges.This effect is often interpreted as a negative one because a person has to let go of one want in order to satisfy another desire. This illustration clearly shows that budget constraint plays a major role in decision-making. (Mankiw, 2004) The second area of economics, interaction with others, affects members of society positively because in a free market economy, prices could not just be d ictated by producers and sellers without the involvement or say of the consumers.In other words, if the price of a certain commodity proves too expensive, consumers would usually look for cheaper alternatives, thereby causing the demand for the more expensive version to fall. If the 21 colored television set produced by Sony Corporation, for instance, has been priced much higher than the 21 colored television of Philips, chances are that consumers would opt for the television set world sold by Philips because of the lower price. In this case, preference for Sony, which might prove to have a higher quality, could only be expressed by those who have the money, therefore feeling no budgetary constraints.Finally, the workings of the economy could affect an individual both positively and negatively. One instant is when government decides to print and circulate an abnormally high volume of money. This situation forces money to depreciate in value, thereby resulting to inflation. A hig h level of inflation causes prices to increase because of the additional costs being shouldered by manufacturers owing to the lower value of money. An upside of this situation, however, could be a temporary increase in employment. Because of the availability of money, employers can contribute to hire additional workers. (Mankiw, 2004)