<link rel="stylesheet" href="http://themis.geocities.yahoo.com/jsoff.css?thIP=188.8.131.52&thTs=1256295061"> (a) Structural Unemployment: It is also known as Marxian unemployment or long-term unemployment. It is due to slower growth of capital stock in the country.
Readers Question: What are the effects of increased investment on aggregate demand in the short term and the long term. Investment means capital expenditure (e.g. purchasing machines or building bigger factory) Investment is a component of AD. – AD+ C+I+G+X-M. Investment spending takes about 15% of AD; it is not as significant as consumer spending which is 66%. If Investment increases, then ceteris paribus, AD will increase. However, it depends on the economic circumstances. e.g. if there was a situation of falling house prices and lower consumer spending, increased investment may be insufficient to increase AD. In the long term, higher investment may increase productive capacity and increase aggregate supply.
The IS curve moves to the right, causing higher interest rates (i) and expansion in the "real" economy (real GDP, or Y). The IS/LM model ( I nvestment — S aving / L iquidity preference — M oney supply ) is a macroeconomic tool that demonstrates the relationship between interest rates and real output in the goods and services market and the money market. The intersection of the IS and LM curves is the "general equilibrium" where there is simultaneous equilibrium in both markets. [ 1 ] [ edit ] History The IS / LM model was born at the Econometric Conference held in Oxford during September, 1936.
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Real wages in the US from 1964 to 2004 have fluctuated. They have remained mostly stagnant over this period of time. U.S. productivity and average real earnings, 1947-2008
(See Cover) The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. —The General Theory of
K eynesian economics is a theory of total spending in the economy (called aggregate demand) and its effects on output and inflation . Although the term has been used (and abused) to describe many things over the years, six principal tenets seem central to Keynesianism. The first three describe how the economy works. 1. A Keynesian believes that aggregate demand is influenced by a host of economic decisions—both public and private—and sometimes behaves erratically.
Keynesian economics ( pron.: / ˈ k eɪ n z i ə n / KAYN -zee-ən ; or Keynesianism ) is the view that in the short run , especially during recessions , economic output is strongly influenced by aggregate demand (total spending in the economy). In the Keynesian view, aggregate demand does not necessarily equal the productive capacity of the economy ; instead, it is influenced by a host of factors and sometimes behaves erratically, affecting production, employment, and inflation. [ 1 ] The theories forming the basis of Keynesian economics were first presented by the British economist John Maynard Keynes in his book, The General Theory of Employment, Interest and Money , published in 1936, during the Great Depression . Keynes contrasted his approach to the ' classical ' (more commonly ' neoclassical ') economics that preceded his book.
The General Theory and the Current Crisis: A Primer on Keynes’ Economics Intro | Pt. I | Pt. II | Pt. III By Alejandro Reuss