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Free market

Free market
For economic systems coordinated by either free markets or regulated markets, see Market economy. A free market is a market system in which the prices for goods and services are set freely by consent between sellers and consumers, in which the laws and forces of supply and demand are free from any intervention by a government, price-setting monopoly, or other authority. A free market contrasts with a controlled market or regulated market, in which government intervenes in supply and demand through non-market methods such as laws creating barriers to market entry or directly setting prices. A free market economy is a market-based economy where prices for goods and services are set freely by the forces of supply and demand and are allowed to reach their point of equilibrium without intervention by government policy, and it typically entails support for highly competitive markets and private ownership of productive enterprises. Economic systems[edit] Laissez-faire economics[edit] Notes[edit] Related:  Wikipedia Topics

Factors of production Historical schools and factors[edit] In the interpretation of the currently dominant view of classical economic theory developed by neoclassical economists, the term "factors" did not exist until after the classical period and is not to be found in any of the literature of that time.[5] Differences are most stark when it comes to deciding which factor is the most important. For example, in the Austrian view—often shared by neoclassical and other "free market" economists—the primary factor of production is the time of the entrepreneur, which, when combined with other factors, determines the amount of output of a particular good or service. However, other authors argue that "entrepreneurship" is nothing but a specific kind of labor or human capital and should not be treated separately. The Marxian school goes further, seeing labor (in general, including entrepreneurship) as the primary factor of production, since it is required to produce capital goods and to utilize the gifts of nature.

Monetarism Monetarism is a school of economic thought that emphasizes the role of governments in controlling the amount of money in circulation. It is the view within monetary economics that variation in the money supply has major influences on national output in the short run and the price level over longer periods and that objectives of monetary policy are best met by targeting the growth rate of the money supply.[1] Monetarism today is mainly associated with the work of Milton Friedman, who was among the generation of economists to accept Keynesian economics and then criticize Keynes' theory of gluts using fiscal policy (government spending). Description[edit] Monetarism is an economic theory that focuses on the macroeconomic effects of the supply of money and central banking. The result was summarized in a historical analysis of monetary policy, Monetary History of the United States 1867–1960, which Friedman coauthored with Anna Schwartz. Opposition to the gold standard[edit] Rise[edit] General:

Gross domestic product Gross domestic product (GDP) is defined by the Organisation for Economic Co-operation and Development (OECD) as "an aggregate measure of production equal to the sum of the gross values added of all resident, institutional units engaged in production (plus any taxes, and minus any subsidies, on products not included in the value of their outputs)."[2] GDP estimates are commonly used to measure the economic performance of a whole country or region, but can also measure the relative contribution of an industry sector. The more familiar use of GDP estimates is to calculate the growth of the economy from year to year (and recently from quarter to quarter). History[edit] The concept of GDP was first developed by Simon Kuznets for a US Congress report in 1934.[4] In this report, Kuznets warned against its use as a measure of welfare (see below under limitations and criticisms). The history of the concept of GDP should be distinguished from the history of changes in ways of estimating it.

Money supply Money supply data are recorded and published, usually by the government or the central bank of the country. Public and private sector analysts have long monitored changes in money supply because of its effects on the price level, inflation, the exchange rate and the business cycle.[4] That relation between money and prices is historically associated with the quantity theory of money. The nature of this causal chain is the subject of contention. In addition, those economists seeing the central bank's control over the money supply as feeble say that there are two weak links between the growth of the money supply and the inflation rate. Empirical measures in the United States Federal Reserve System[edit] See also European Central Bank for other approaches and a more global perspective. Money is used as a medium of exchange, a unit of account, and as a ready store of value. This continuum corresponds to the way that different types of money are more or less controlled by monetary policy.

Mixed economy In general the mixed economy is characterised by the private ownership of the means of production, the dominance of markets for economic coordination, with profit-seeking enterprise and the accumulation of capital remaining the fundamental driving force behind economic activity. But unlike a free-market economy, the government would wield indirect macroeconomic influence over the economy through fiscal and monetary policies designed to counteract economic downturns and capitalism's tendency toward financial crises and unemployment, along with playing a role in interventions that promote social welfare.[2] Subsequently, some mixed economies have expanded in scope to include a role for indicative economic planning and/or large public enterprise sectors. As an economic ideal, mixed economies are supported by people of various political persuasions, typically centre-left and centre-right, such as social democrats[7] or Christian democrats. Etymology[edit] Philosophy[edit] History[edit]

Quantity theory of money In monetary economics, the quantity theory of money states that money supply has a direct, proportional relationship with the price level. While mainstream economists agree that the quantity theory holds true in the long run, there is still disagreement about its applicability in the short run. Critics of the theory argue that money velocity is not stable and, in the short-run, prices are sticky, so the direct relationship between money supply and price level does not hold. Alternative theories include the real bills doctrine and the more recent fiscal theory of the price level. Origins and development of the quantity theory[edit] The quantity theory descends from Copernicus,[1][2] followers of the School of Salamanca, Jean Bodin,[3] and various others who noted the increase in prices following the import of gold and silver, used in the coinage of money, from the New World. John Maynard Keynes, like Marx, accepted the theory in general and wrote... "This Theory is fundamental. where and , or

Planned economy Planned economies are usually categorized as a particular variant of socialism, and have historically been supported by and implemented by Marxist-Leninist socialist states. Analysts argue that Soviet-type central planning did not actually constitute a planned economy in that a comprehensive and binding plan did not guide production and investment; therefore the term administrative command economy emerged as a more accurate designation for the economic system that existed in the former Soviet Union and Eastern bloc, highlighting the role of centralized hierarchical administrative decision-making in the absence of popular and democratic local market-based oversight as the essential coordinating feature of these economies.[3] Although most economies today are market-based mixed economies (which are partially planned), fully planned economies of the Soviet-type continue to exist (as of 2013) in Cuba, North Korea and Laos.[10][needs update] Economic planning versus command economies[edit]

Forex Education | Learn Forex Trading | Forex4Noobs Market economy Market economies can range from hypothetical laissez-faire and free market variants to regulated markets and interventionist variants. In reality market economies do not exist in pure form, since societies and governments regulate them to varying degrees.[4][5] Most existing market economies include a degree of economic planning or state-directed activity, and are thus classified as mixed economies. The term free-market economy is sometimes used synonymously with market economy, but it may also refer to laissez-faire or Free-market anarchism.[6] Capitalism[edit] Capitalism generally refers to economic system where the means of production are largely or entirely privately owned and operated for a profit, structured on the process of capital accumulation. In general, investments, distribution, income, and prices are determined by markets. There are different variations of capitalism with different relationships to markets. Anglo-Saxon model[edit] East Asian model[edit] Laissez-faire[edit]

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