Theories And Application Of Economics Essay

1850 words - 7 pages

In the twentieth century many classical or non-classical Economist claimed that the Economy will always be at or close to natural level of Employment (Keynes, 1936). In Appropriate it is the great features of the economic system in which we live, while variation in output and employment will make the economic system violent. The recession in United States was resolved by practicing the Keynes policy. Keynes Expansionary policies were also implemented by Sweden and Germany but the true success of Keynes can be seen after the World War II which provided a boom to Economy (Keynes, 1937) Evidence indicates that natural employment will be for limited period.
In order to start the discussion I will provide with the definitions of both Aggregate Demand and Aggregate supply. According to (Blanchard,Amighini,Giavazzi, 2010), Aggregate Demand represents the Combination of price and output corresponds with the equilibrium in the goods and financial market. Further in order to understand above statement we can elaborate Aggregate Demand. Aggregate Demand shows the relationship between Equilibrium markets for goods with equilibrium market for money. If there is no shadow economy then total Expenditure(Y) can be equal to total GDP or total income earned, so consumption, investment and government expenditure can be found in the GDP or total expenditure model. Many Entrepreneurs believe that changes in consumer consumption will affect price and then later investment. However economists consider that investment will be dependent on interest rate. Change in price will also affect aggregate demand (AD). Hence AD is the reflection of all of Equilibrium points between IS/LM model this can be seen in the graph below Figure1
(Figure1 Source Blanchard)
[The initial price is (P) and output(Y) with the point (E) .As the price rise to P1 the demand for money rises because now the economy will demand more money for transactions but the real money supply will fall (as the real money supply=M/P) and this will implies LM curve to shifts upwards (LM1) leading to decrease output from(Y) to (Y1) and increase interest rate from point (r) to (r1)](Blanchard 2010).This process will further move as LM further shift to LM2 with the increase in price and interest rate
In addition the aggregate supply captures the effect of output on the price derived from Equilibrium in the labour market.(Blanchard,Amighini,Giavazzi, 2010). Supply of labour can be determined by wage rate and the price level so economist determined the following equation
the nominal wage will be set depending on the expected price on the unemployment rate,(u) whereas the price in economy will be set the firms that will be equal to nominal wage multiplied by mark-up plus 1 (Blanchard,2010).The aggregate supply is thought to be equal to natural level. The aggregate Demand and Aggregate supply will make the...

Find Another Essay On Theories and Application of Economics

Intent And Application Of Political Systems

1099 words - 4 pages Intent and Application The purpose of this essay is to explore the view of the individual by three differing political systems by looking at a major country of each that holds the ideals of the system. I will also explore the differences in philosophy and application of that philosophy as it concerns the view of the individual. A contrasting viewpoint is represented by each system as well as a contrasting treatment of the individual in each

Application of Mens Rea and Juvenile Culpability

2363 words - 9 pages enter into a new century, we look back at precedents that have been set and changed by United States Supreme Court rulings. There have been changes in the laws and a distinct reevaluation of how the application of Mens Rea and Juvenile Culpability are necessary to identify the elements of a crime as well as define its purpose. Stanford V. Kentucky (1989) Facts At seventeen years of age, Kevin Stanford was convicted for murder, sodomy, robbery

History and Application of Common Law

1873 words - 7 pages ) which was developed two hundred years after the birth of common law was invented, functions to resolves the difficulty and dispute that common law failed to address [The common Law and Civil Law Traditions, 2010: 3-4]. Court of equity applied a set of principles and maxims of equity in accordance to natural law and Roman law, rather than applying common law that supplement strict rules of common law where their application would operate harshly

Theories of Ranciere and Gramsci

630 words - 3 pages Knowledge is something that everyone develops throughout his or her life by either visually, experience, or education. Education plays a huge role in ones life, and is the main factor for the build up of knowledge of a person. *Both Ranciere and Gramsci had similar theories about education, by that they both believed two things can be related to each other, and learning a language is important. Knowing the language of a foreign country can be

The salient features of Islamic economics and contrast them with those of conventional economics

783 words - 3 pages Introduction to EconomicsThe salient features of Islamic economics and contrast them with those of conventional economics?IntroductionIslamic economics is based on the Shariah which governs secular as well as religious activities. The basic objectives are to ensure general human well-being and socio-economic justice. Islam advice Muslims to enjoy the bounties provided by Allah and to set quantitative limits to the extent of material growth of

Case Studies and the Design and Application of Information Technology

2959 words - 12 pages and application of information technology. In this regard, the paper will give special attention the nature of utility that case studies provide to the design and application of information technology. The design and application of information technology is generally associated with developments in information technology (Liebowitz and Khosrowpour 1997, 46). While developments in information technology are taking place rapidly, it is essential to

Richard Speck and Comparison of Theories

2481 words - 10 pages Introduction Varying theories such as rational choice theory, trait theory, and social structure theory are commonly used to explain why crime happens. Application of these three theories in discussing the crimes of Richard Speck can help us to better understand which of the theories may apply and perhaps help give us insight into why he committed his crimes. But they are more beneficial when not looking at a single specific crime, but the

Theories of Visual and Auditory Attention

2402 words - 10 pages A popular subject within psychology is that of selective attention, particularly visual, auditory or visual and auditory attention (Driver, 2001). There are many theories of visual and auditory attention that provide us with a greater understanding of the ways in which humans attend to different stimuli (Driver, 2001), such as Broadbent’s (1958) filter theory of attention for example. This essay will compare and contrast theories of visual and

The Evolution of Management Practices and Theories

2086 words - 8 pages understanding of management theories which will propel them to deliver at the work place effectively and efficiently. This essay follows the path of management history while investigating the growth of management thinking and how contemporary management practices have evolved from this evolution. 1.1 Diverse Definition for Management and Organisations According to Huczynski and Buchanan (2001) organization are “social arrangement for

Theories Of Knowledge And Psychological Applications

2914 words - 12 pages Theories of Knowledge and Psychological Applications How individuals are able to obtain knowledge is something that psychologists have studied for a number of years. The ability to store and retrieve knowledge provides individuals with the propensity to form logical thought, express emotions and internalize the world around them. In order for a psychologist to understand the theories of knowledge it is necessary to investigate the

The Explanation of Vygotsky and Piaget’s Theories

2180 words - 9 pages There are many assessments of Vygotsky and Jean Piaget's work during their lifetimes and deaths. Many of their theories have gone beyond what I am sure that they had expected for them too. Teachers, researchers and parents dabble in their theories of child development, social development and other theories when going about their lives. Whether it is a job or parenting it is a must to know about these two philosophers and what they believed to be

Similar Essays

Application Of Criminology Theories To Movies

2907 words - 12 pages Criminology and Critical Criminology.The predominant theories throughout the film however are Biological Positivism and Marxist Criminology.The Europeans view Aboriginals as an inferior race, which would accord with Biological Positivism perspective. Biological Positivism posits that crime is not the choice of the offender. Moreover, it is a 'fault' in their biological nature, which causes them to commit crime . Positivists believe that behaviour is

Application Log: Semiotics In Daily Life (Journal Of Application Of Communication Theories)

4692 words - 19 pages situation.Through the study of communication theories and this application log, I have discovered that even before I knew about these theories I engaged in them. The instances I have taken from my past and used in this assignment are an indication that these theories are not just hypothesis developed by professionals but observations made of pure human nature.References:Griffen,Em. A First Look at Communication Theory with Conversations withCommunication Theorists. (2002)

Economics Of Crime And Punishment Essay

1670 words - 7 pages The recent arrest of the so called Bali Nine for allegedly smuggling heroin into Australia (Powell & Carroll 2005, online) has caused controversy and created rifts between Australian and Indonesian relations. Resulting to a death penalty through firing squad if found guilty, what instigated these people to participate in this illegal activity? There are three approaches dominate the theories of crime - psychological, sociological and

Stalin's Worldview And The Application Of Communism

3037 words - 12 pages 1.0 Introduction This essay investigates to what extent Josef Stalin’s personal and political worldviews shape and reflect his application of Communism. By examining the people that surrounded Stalin at a young age, the places where he grew up and went to school, the ideas that he latched on to, and the people and theories he believed in, his basic personality can be determined. Through the investigation of his political career, Stalin’s most