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Socialist approach of Planning

Socialist approach of Planning
Socialist approach of planning is similar to interventionist planning. The classical conception of socialist economic planning held by Marxists involved an economic system where goods and services were valued, demanded and produced directly for their use-value, as opposed to being produced as a by-product of the pursuit of profit by business enterprises. This idea of “production for use” is a fundamental aspect of a socialist economy. This involves social control over the allocation of resources and production. This differs from planning within the framework of capitalism, which is based on the planned accumulation of capital in order to either stabilize the business cycle (when undertaken by governments) or to maximize profits (when undertaken by firms), as opposed to the socialist concept of planned production for use. “Socialist planning “usually refers to the Soviet-type command economy. 
The main features are: Centrally (government) controlled resource…
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Local Development Planning (LDP)

Local development planning refers to the planning of areas at the local levels which aims to mobilize resources and technology available at the local level for the development of the rural areas for the delivery of necessary services and facilities to the local people. In other words, the most important aspect of local development planning is to mobilize local resources, use local skill and technology and to assist local people of their needs.
The Main philosophy of local development planning is to involve the local people directly in the identification, formulation, implementation and maintenance of local level projects and make the development works sustainable.
Local development planning is the planning by the people at local level. So, it is bottom up approach in development perspective.
If local development project is promoted by increasing investment in production oriented programs based on employment oriented technology to create employment opportunity at local level, …

Micro and macro economics

Interdependence between micro and macro economicsMicro and macro-economics are different in their approaches:
- Micro studies the individual units of the whole economy whereas, Macro deals with the aggregates and sub-aggregates related to the whole economy
- The objective, subjective matter, assumptions etc, of micro economics are different from those macro-economics. But micro and macro are independent.
- The objective of the study of economic can’t be fulfilled by the study of only one, micro and macro.
- They are independent on each other because the parts affect the whole and the whole effects the parts.
- A general economy covers the both micros and macros.
- It should explain prices, output, incomes, behavior of individual firm and industry and the aggregates of the individual variables.   Dependence of micro on macro economics-Micro economics analyzes problem and behavior of small units of the economy. All micro economic variables are fraction of macro-economic variables. -Micro econom…

Neo-Keynesian Approach to Inflation: The Phillips Curve

Neo-Keynesian Approach to Inflation: The Phillips Curve

Generally, Neo-Keynesian macroeconomics has the following four propositions.
i.Private sector is unstable ii.Money in the long run is neutral iii.There exists tradeoff between inflation and unemployment iv.Countercyclical policies are preferable to achieve the macroeconomic stability
Phillips (1958), using the data of Great Britain, innovated the Phillips curve which showed the negative relationship between rate of change in money wage and rate of change in unemployment. The original Phillips curve was just the empirical relationship, however, most influential theoretical interpretation steamed from R.G. Lipsey (1960). The Phillips curve appeared empirically plausible and verifiable explanation of continuously rising money wage, a phenomena which the classical labour market could not explain immediately.
The demand for and supply of labour schedules were assumed to be negative and positive function of money wage respectively. Presence …

The Samuelson and Slow Modification

The Samuelson and Slow Modification
Samuelson and Slow (1960) modified the Phillips curve so that it represents the relationship between rate of inflation and rate of unemployment. The link between wage inflation and price inflation was established through markup equation which may be stated as below:  P = (1 + a) WN/Y ……………… (1) Where, P = general level of price      W = money wage rate      N = number of employment      Y = real output      a = constant profit margin
In this above equation WN/Y denotes the unit labor cost – the cost of labor per unit of output. Using the concept of labor productivity (p = Y/N) equation (1) can be written as,      P = (1 + a) W/p
Differentiating the equation after natural log transformation we will get,      π = gw – λ ……………….. (2)
Here, inflation rate (π) is equal to difference between rate of growth in money wage rate (gw) and the rate of growth in labor productivity (λ).
Further, let us assume that Phillips curve is of the following form.  gw = πe + bu-1 + βλ…

Monetary Approach to Balance of Payment

Monetary Approach to Balance of Payment – by Harry G. Johnson in 1977

The monetary approach to balance of payment (developed by Harry G. Johnson in 1977) is also known as the ‘Small Country Model of Balance of Payment’ that shows an automatic adjustment between change in money supply (∆Ms) and money demand (∆Md) through the change in the position (deficit/surplus) of Balance of Payment. According to the approach, Balance of Payment is always and everywhere a monetary phenomenon so that there is a significant role of both money supply and money demand in the position of Balance of Payment. The approach is based on given assumptions:

a. The country is small and open economy

b. All countries are functioning with full employment economy

c. There is a fixed exchange rate regime

d. There is no money illusion

e. There is a strong desire of people for adjustment between Ms = Md

f. There is a perfect mobility of goods/s and financial assets from a country to others