Skip to main content

Economics

Comments

Popular posts from this blog

Decomposition or sources of high-power money

Decomposition or sources of high-power money (H) with the help of the balance sheet identity of the central bank.
High-power money (H) is the currency (notes, coins) produced by the central bank that consists of the currency (C) held by people in their hands or pockets, total cash reserve (R) of BFIs and other deposits of government, government enterprises and foreign offices (OD) with the central bank. i.e H = C + R + OD It is called high-powered money as on the basis of which all BFIs create money in the form of demand deposits (DD) under the credit creation process (CC). There are many sources of (H) that can be decomposed with the help of the balance sheet identity of the central bank i.e Total assets = Total liabilities             ML + NML = FA + OPA             ML = FA – NML + OPA             ML = FA – (NML - OPA)             ML = FA – NNML Where, ML = Monetary liabilities NML = Non-monetary liabilities OPA = other physical assets FA = Financial assets NNML = Net non-monetary liabilities H …

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 …

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…