Skip to main content
7 votes
Accepted

What would monetarists do when interest rates approach zero and become ineffective?

An excellent overview of not just monetarist view on this issue but all other mainstream views on monetary policy at zero lower bound (ZLB) can be found in Ullersma (2002) The Zero Lower Bound on ...
1muflon1's user avatar
  • 56.7k
5 votes

Keynes' conception of investment

The investment ($I$) equals savings ($S$) result is derived by Keynes just from national identity, as a result it just hold by definition. Keynes in the passage starts with the simplified version of ...
1muflon1's user avatar
  • 56.7k
5 votes

Where does capital come from?

Material capital is any durable good that is used as a factor of production and, by virtue of being durable, it is gradually consumed in production over a maximum possible duration of a length that is ...
אהרן רובין's user avatar
4 votes
Accepted

Is Keynesian economic theory still considered capitalism?

Capitalism is not well-defined in economics. In most economic textbooks the word capitalism is not even printed. However, according to dictionary (Merriam-Webster) definition: an economic system ...
1muflon1's user avatar
  • 56.7k
4 votes
Accepted

Why is full employment desired in an economy if competition promotes innovation?

Your question shows quite a lot of misunderstanding about what full employment means so let me first correct this. Full employment does not mean everyone is employed. Even at full employment there ...
1muflon1's user avatar
  • 56.7k
3 votes

Macroeconomics- money supply LM model

In the standard LM Model money supply is a vertical line and money demand is a decreasing function (in the interest rate - money framework). An increase in the money supply curve shifts the supply ...
PAS's user avatar
  • 349
3 votes

Does Keynesianism increase the incentive to invest?

Yes, the big success of Keynesianism was uncovering that there is an incentive to invest in a demand-led recession, from the perspective of the whole economy, because of the multiplier. Just as you ...
410 gone's user avatar
  • 8,168
3 votes

What is the difference between aggregate supply and GDP?

Aggregate supply is a relationship of price level and output. It is a function, or a curve, or a table. It is not a single value. If we know a particular price level, then we can determine the level ...
Mathew Knudson's user avatar
2 votes
Accepted

Keynesian Ethics

If you enjoy ethical and philosophical aspects, you should look into international aid and intervention. Check out "Adaptive Preferences and Women's Empowerment" by Khader and work by Nussbaum in ...
Ian Brigmann's user avatar
2 votes

Simple Keynesian model of income determination

I cannot see any way to have negative autonomous consumption. I believe autonomous consumption's extreme is zero if there's a kind of superheroes who don't need water, electricity and food to live and ...
Commissar Vasili Karlovic's user avatar
2 votes
Accepted

Why is the consumption line and 45degree line's intersection not the equilibrium income level?

For most people consumption does not equal income. Many consume less (they save) and others consume more (they take on debt) than they earn. In an economy with financial markets and heterogeneous ...
Tobias's user avatar
  • 970
2 votes

Where does capital come from?

From a Marxist perspective, capital is a social relation. Essentially, it is money that begets more money. As such, it only becomes more or less synonim with "means of production" once it takes over ...
Luís Henrique's user avatar
2 votes

Does Keynesianism increase the incentive to invest?

Your question includes a flawed assumption: why would you assume that you'd recapture any significant portion of the additional output? Let's say that the multiplier is .05, so that for your billion ...
dismalscience's user avatar
2 votes

What is "industrial capitalism"?

Industrial capitalism, characterized by its use of heavy machinery and a much more pronounced division of labor. It is a system whereby industry and resources are owned by few for profit. In this ...
Mike J's user avatar
  • 1,471
2 votes
Accepted

IS-LM - Effect of interest rate on price level

There are two different way to present the IS-LM model, one with a vertical money supply line, and one with a horizontal interest rate line. Consider the second one, as it represents better what ...
hrrrrrr5602's user avatar
2 votes
Accepted

Demand-side effects meaning

Demand side effects: Effects to the economy whenever the demand-side factors (the components of GDP [in the abstracts case, Government spending]) either increases or decreases. Demand AD (GDP) = ...
Mike J's user avatar
  • 1,471
2 votes
Accepted

Would directing more money to science and research and development be an effective response to recessions?

tl;dr: R&D spending cannot stimulate economy during just by increasing long-run aggregate supply because recessions are fluctuations around the long-run aggregate supply and not necessary affected ...
1muflon1's user avatar
  • 56.7k
2 votes

What are the assumptions of real business cycle theory and Keynesian theory?

The distinction is between "nominal" and "real" recessions and booms. Real business cycle theory was developed to point out the fact that variations in employment and hours could occur even in an ...
Ege Erdil's user avatar
  • 691
2 votes
Accepted

A question on the simple Keynesian model

In Keynesian model investment is saving. By definition saving is (assuming no government taxes or spending to simplify math): $$S=Y-C \tag{*}$$ Next GDP in a close economy with no government spending ...
1muflon1's user avatar
  • 56.7k
1 vote
Accepted

Why is Keynes attacking the (neo)classical theory of interest rates on the grounds that it is indeterminate?

You can use some some initial $Y_0$ to find an interest rate, but this is precisely the indeterminacy problem. We would like to be able to derive the equilibrium interest rate without assuming some ...
1muflon1's user avatar
  • 56.7k
1 vote
Accepted

Why Keynesians prefer short run measures despite straight long-run Phillips curve?

Actually both New Keynesians, Keynesians and Monetarists are advocating for short-run government activism, just the underlying mechanisms are different and Monetarists stress monetary over fiscal ...
1muflon1's user avatar
  • 56.7k
1 vote

Saving equals to investment

It is because these two examples use the word investment in different meaning. In the top example, investment means all investment whether it is investment into something productive or inventory ...
1muflon1's user avatar
  • 56.7k
1 vote
Accepted

Large National Debt by borrowing money from foreign sources

The statement should be ideally subjected to several caveats because there is a lot of heterogeneity between how difficult it is to manage external debt among nations (e.g. developed vs developing ...
1muflon1's user avatar
  • 56.7k
1 vote

How did investment go from exogenous to endogenous in the IS/LM model?

In the earlier model the fixed investment was a simplifying assumption made for didactic reasons (you dont want to overwhelm students), rather than because investment is actually fixed in general. In ...
1muflon1's user avatar
  • 56.7k
1 vote
Accepted

IS LM CURVE QUESTİON

Investment demand is part of the IS curve since the goods market is given by: $$Y =C(Y-T) + I(Y,i) +G$$ where $I(Y,i)$ would be called investment demand (which will be some function of output and ...
1muflon1's user avatar
  • 56.7k
1 vote

What are the differences on the impact of a universal basic income from a liberal and a keynesian point of view?

'Universal basic income' has largely been in the public dialogue, to counter the negative consequences of automation - or some other reasons for mass unemployment. In such a context, it is proposed as ...
jam 626's user avatar
  • 11
1 vote

Do Keyensians believe that it's wrong for households to aggresively save money?

The issue is more complex than your friend suggest and he is not completely right but at the same time there is a kernel of truth to what he is claiming. There are differences in the effect of savings ...
1muflon1's user avatar
  • 56.7k
1 vote

Good source for marginal propensity to consume by country?

You may need to do some math but the OECD database does have the data that you need to construct MPC by country. As a reminder MPC can be calculated as the change in consumption (ΔC) divided by ...
Mike J's user avatar
  • 1,471
1 vote
Accepted

Keynesian Cross and Balanced Budget Multiplier

The fiscal multiplier in (iv) would arise from $$ Y = C+I+G$$ $$ Y = a + c(Y-T)-d\alpha Y +G+I.$$ This can be rearranged as $$Y(1-c+d\alpha)=a-cT+G+I,$$ and, therefore, the fiscal multiplier ...
Patricio's user avatar
  • 721
1 vote

Short run Aggregate supply curve is horizontal or positively sloped?

Explaining the shape of the horizontal range In the very short run, the AS curve is perfectly price-elastic (i.e. on the diagram, it is a horizontal line). It is also referred to as the Keynesian ...
Tan Yong Boon's user avatar

Only top scored, non community-wiki answers of a minimum length are eligible