Macroeconomics

Economics For a topical guide to this subject, see Outline of economics. Economics is the social science that studies the behavior of individuals, households, and organizations (called economic actors, players, or agents), when they manage or use scarce resources, which have alternative uses, to achieve desired ends. Agents are assumed to act rationally, have multiple desirable ends in sight, limited resources to obtain these ends, a set of stable preferences, a definite overall guiding objective, and the capability of making a choice. The traditional concern of economics is to gain an understanding of the processes that govern the production, distribution and consumption of goods and services in an exchange economy.[3] An agent may have purposes or ends, such as reducing or protecting individuals from crime, on which he or she wants to spend resources. Definitions There are a variety of modern definitions of economics. J. Economics is a study of man in the ordinary business of life. Microeconomics

John Maynard Keynes John Maynard Keynes, 1st Baron Keynes,[1] CB, FBA (/ˈkeɪnz/ KAYNZ; 5 June 1883 – 21 April 1946) was a British economist whose ideas have fundamentally affected the theory and practice of modern macroeconomics, and informed the economic policies of governments. He built on and greatly refined earlier work on the causes of business cycles, and is widely considered to be one of the founders of modern macroeconomics and the most influential economist of the 20th century.[2][3][4][5] His ideas are the basis for the school of thought known as Keynesian economics, and its various offshoots. In 1999, Time magazine included Keynes in their list of the 100 most important and influential people of the 20th century, commenting that: "His radical idea that governments should spend money they don't have may have saved capitalism."[10] He has been described by The Economist as "Britain's most famous 20th-century economist. Early life and education[edit] King's College, Cambridge. Career[edit]

Microeconomics This is in contrast to macroeconomics, which involves the "sum total of economic activity, dealing with the issues of growth, inflation, and unemployment."[2] Microeconomics also deals with the effects of national economic policies (such as changing taxation levels) on the aforementioned aspects of the economy.[4] Particularly in the wake of the Lucas critique, much of modern macroeconomic theory has been built upon 'microfoundations'—i.e. based upon basic assumptions about micro-level behavior. Assumptions and definitions[edit] Microeconomic theory progresses by defining a competitive budget set which is a subset of the consumption set. The utility maximization problem is the heart of consumer theory. The utility maximization problem is a simple constrained optimization problem in which an individual seeks to maximize utility subject to a budget constraint. The theory of supply and demand usually assumes that markets are perfectly competitive. Microeconomic topics[edit] Monopoly[edit]

Keynesian economics 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 aggregate supply-focused 'classical' economics that preceded his book. The interpretations of Keynes that followed are contentious and several schools of economic thought claim his legacy. Keynesian economists often argue that private sector decisions sometimes lead to inefficient macroeconomic outcomes which require active policy responses by the public sector, in particular, monetary policy actions by the central bank and fiscal policy actions by the government, in order to stabilize output over the business cycle.[2] Keynesian economics advocates a mixed economy – predominantly private sector, but with a role for government intervention during recessions. Overview[edit] Theory[edit] Concept[edit] Excessive saving[edit]

Supply and demand The price P of a product is determined by a balance between production at each price (supply S) and the desires of those with purchasing power at each price (demand D). The diagram shows a positive shift in demand from D1 to D2, resulting in an increase in price (P) and quantity sold (Q) of the product. If demand increases (demand curve shifts to the right) and supply remains unchanged, a shortage occurs, leading to a higher equilibrium price.If demand decreases (demand curve shifts to the left) and supply remains unchanged, a surplus occurs, leading to a lower equilibrium price.If demand remains unchanged and supply increases (supply curve shifts to the right), a surplus occurs, leading to a lower equilibrium price.If demand remains unchanged and supply decreases (supply curve shifts to the left), a shortage occurs, leading to a higher equilibrium price. Graphical representation of supply and demand[edit] Supply schedule[edit] The determinants of supply are: Demand schedule[edit]

Opinion / Lead : New geography with old geometry The international institutional structure has remained largely static since the mid-20th century rather than evolving with the changing power realities and challenges. Reforming and restructuring the international system poses the single biggest challenge to preserving global peace, stability, and continued economic growth. A 21st century world cannot remain indefinitely saddled with 20th century institutions and rules. Power shifts are an inexorable phenomenon in history. For example, it was only after the Cold War began that the Soviet Union rose as a global military power, although it failed to become a true economic power. Quirk of history The United States emerged as the sole superpower due to a quirk of history — the sudden, unexpected collapse of the Soviet Union. The fact is that there has never been a global hegemon on the lines of America. A liberal, rules-based international order for the 21st century can be developed if sincere efforts begin toward that goal.

Bretton Woods system The Bretton Woods system of monetary management established the rules for commercial and financial relations among the world's major industrial states in the mid-20th century. The Bretton Woods system was the first example of a fully negotiated monetary order intended to govern monetary relations among independent nation-states. The chief features of the Bretton Woods system were an obligation for each country to adopt a monetary policy that maintained the exchange rate by tying its currency to gold and the ability of the IMF to bridge temporary imbalances of payments. Preparing to rebuild the international economic system while World War II was still raging, 730 delegates from all 44 Allied nations gathered at the Mount Washington Hotel in Bretton Woods, New Hampshire, United States, for the United Nations Monetary and Financial Conference, also known as the Bretton Woods Conference. Origins[edit] Interwar period[edit] Nazi Germany also worked with a bloc of controlled nations by 1940.