This document discusses seminar questions related to economics. It covers topics such as the limitations of the IS-LM model, Keynesian theory of recessions, real balance argument, and more. References are provided for further reading.
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SEMINAR QUESTIONS1 ECONOMICS Student Name Institutional Affiliation Facilitator Course Date
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SEMINAR QUESTIONS2 Question1 It is easy and simple to understand the model since it gives the IS and LM curves and this makes the model attractive. The model limits some functionality in the economy since it can’t formulate how taxes and spending policies are being handled and it gives little on other major pillars of macroeconomics such as inflation, international markets and lack of capital formation and labor productivity (Young and Zilberfarb, 2012). This explains why the model became less favored. Question2 Yes. The Keynes theory of recessions is downward rigidity of nominal wages for which there seems to be good evidence. When the economy is in recession restoration of full employment involves reducing real wages by increasing the aggregate demand and increasing prices in relation to wages. The followers of Clower and Leijonhufvud raised the issue of cutting the wages butKeynes had a belief that workers involve exhibition of “money illusion”. This, therefore, means that workers are ready to accept the reduced real wage which is required to restore full employment. This only applies if the reduced real wages are achieved by increasing prices, but not the reduction of money wage (Laurent and Cacheux, 2014). Question3 The argument of real balance is against the Keynesian economic theory as it cites that deflation periods resulting from decreased aggregate demand would be more self-correcting (Woodford, 2011). This would cause an increase in wealth; causing expenditures to rise and thus correcting the drop-in demand. The effects of real balance can be strong enough to challenge government policies of fighting environment. This is due to the fact once total demand for a country goes
SEMINAR QUESTIONS3 down, people even the unemployed feel rich enough and able to sustain their lives. This gives them the notion of no need of straining thinking they can challenge the vices in unemployment. Question4 The convincing is not high since Davidson fails completely to show how genuine insights are represented by the supposed discoveries. He instead focuses on the worst ideas of Keynes. From the "National Self-Sufficiency"-1933 article (Boyle, 2015) that most followers of Keynes's tend to forget, Davidson is viewed to have very little utilization of free trade. No way can be taken to carry out an empirical analysis about their point of view since the future is in fact radically uncertain. Question5 Yes, Kalecki was right in that monopolies make their own prices which highly determine the level of demand. Micro and macroeconomics are related since their general trends sometimes affect one another. Sometimes the trends are opposite completely. Generally, the trends of either are reflected in the trends of another but their reflection scale may differ sometimes. The macroeconomics analysis is founded by microeconomics. Question6 “The monetarist view that inflation is a monetary phenomenon operating through demand is more convincing”. The rate of increase in the supply of money in the economy is similar to the rate at which inflation increases. In this analysis, the aggregate supply has been assumed to be constant and employment is assumed to be full in the economy. It also shows that micro and macroeconomics go hand in hand in most of the economic factors.
SEMINAR QUESTIONS4 Question7 It is convincing since it reviews the main aspects of Minsky's concept, comparing with competing approaches and, most importantly, taking the Greek debt crisis as an application. It then attempts to prove that the financial instability hypothesis provides the best explanation for the reason why Greece is now in a state of default.
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SEMINAR QUESTIONS5 References Boyle, D., 2015.The Money Changers: Currency reform from Aristotle to e-cash. Routledge. Laurent, E. and Le Cacheux, J., 2014.Fruitful Economics: Papers in Honor of and by Jean-Paul Fitoussi. Springer. Woodford, M., 2011.Interest and prices: Foundations of a theory of monetary policy. princeton university press. Young, W. and Zilberfarb, B.Z. eds., 2012.IS-LM and modern macroeconomics(Vol. 73). Springer Science & Business Media.