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TT Mboweni: Inflation, Growth and Employment Opportunities
TT Mboweni: Inflation, growth and employment opportunities Lecture by Mr TT Mboweni, Governor of the South African Reserve Bank, at the Department of Economics, University of Stellenbosch, Stellenbosch, 6 March 2003. * * * 1. Introduction Members of the Portfolio and Select Committees on Finance, Deputy vice-chancellor, Professors, Staff, Students, Ladies and gentlemen It is very pleasant to be on this side of the beautiful Hex River Mountains and to speak to you on a number of issues right at the core of central banking. The accusation is often heard that central bankers have narrowed the world down to inflation, and do not have an open mind on any other matters. Not true! The way in which these matters come together - the principles behind their interaction - will be central to my talk to you today. 2. The magnitude of the challenges facing our economy Starting with a longer-term picture of inflation, it is a well-known fact that the double-digit inflation which reigned from 1974 to 1992 left considerable scars on our economy. Its redistributive impact was nasty, with the buying power of the most vulnerable groups in society, the poor and the elderly, in particular being undermined. The plight of a pensioner who retired twenty years ago using interest on a fixed deposit to provide for himself or herself is illustrated by the cost of a basket of consumer items which cost R100 in early 1983. The cost of that basket shot up to R380 in early 1993, and currently amounts to R815. Although inflation has receded to single-digit levels and has averaged around 7,8 per cent per annum over the last ten years, this is still enough to very significantly erode the living standard of the most vulnerable groups in our society over time. -
Monetary Policy Assignment #14
Monetary Policy Assignment #14 https://www.youtube.com/watch?v=1dq7mMort9o&index=10&list=PL8dPuuaLjXtPNZwz5_o_5uirJ8gQXnhEO Monetary Policy and the Federal Reserve: Crash Course Economics #10 https://www.youtube.com/watch?v=HdZnOQp4SmU&index=32&list=PLF2A3693D8481F442 Dr. Mary J. McGlasson Video #32 on Monetary Policy Chapter 16: The Federal Reserve (Fed) System, Monetary Policy, Federal Funds Rate vs. Discount Rate, Money Supply, Bank Reserve Requirements, Money Multiplier, Prime Rate, Open Market Operations, “Easy” Money vs. “Tight” Money Policy, Business Cycles & Policy Lags http://money.cnn.com/2017/11/02/news/economy/trump-jerome-powell-federal-reserve/index.html 2 Types of Monetary Policy Monetary Policy Definitions Money Supply The total amount of money in circulation or in existence in a country. Loose Money Policy A loose monetary policy occurs when the money supply is expanded and is easily accessible to citizens to encourage economic growth. Tight Money Policy When the monetary authorities of a country adopt a policy that decreases money supply and raises interest rates as a means to slow down economic activity. Interest Rate The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan. Q: Who controls Monetary Policy in the USA? A: “the Fed” Tools of Monetary Policy: #1) Adjust Reserve Requirements What would happen if the Federal Reserve increased reserve requirements? When the Federal Reserve raises the reserve ratio, it raises the amount of cash banks are required to hold in reserves and reduces the amount of loans they can give to consumers and businesses. -
Netw Rks Reading Essentials and Study Guide
NAME ________________________________________ DATE _______________ CLASS _________ Reading Essentials and Study Guide netw rks Chapter 16: Monetary Policy Lesson 2 Monetary Policy ESSENTIAL QUESTION How does the government promote the economic goals of price stability, full employment, and economic growth? Reading HELPDESK Academic Vocabulary explicit openly and clearly expressed Content Vocabulary fractional reserve system system requiring financial institutions to set aside a fraction of their deposits in the form of reserves legal reserves currency and deposits used to meet the reserve requirements reserve requirement formula used to compute the amount of a depository institution’s required reserves member bank reserve (MBR) reserves kept by member banks at the Fed to satisfy reserve requirements excess reserves financial institution’s cash, currency, and reserves not needed for reserve requirements; potential source of new loans monetary policy actions by the Federal Reserve System to expand or contract the money supply to affect the cost and availability of credit interest rate the price of credit to a borrower easy money policy monetary policy resulting in lower interest rates and greater access to credit; associated with an expansion of the money supply tight money policy monetary policy resulting in higher interest rates and restricted access to credit; associated with a contraction of the money supply open market operations monetary policy in the form of U.S. Treasury bills, or notes, or bond sales and purchases by the Fed discount -
Institutions, History and Wage Bargaining Outcomes: International Evidence from the Post-World War Two Era
Chris Minns and Marian Rizov Institutions, history and wage bargaining outcomes: international evidence from the post-World War Two era Article (Accepted version) (Refereed) Original citation: Minns, Chris and Rizov, Marian (2015) Institutions, history and wage bargaining outcomes: international evidence from the post-World War Two era. Business History, 57 (3). pp. 358-375. ISSN 0007-6791 DOI: 10.1080/00076791.2014.983480 © 2015 Taylor & Francis This version available at: http://eprints.lse.ac.uk/88847/ Available in LSE Research Online: June 2018 LSE has developed LSE Research Online so that users may access research output of the School. Copyright © and Moral Rights for the papers on this site are retained by the individual authors and/or other copyright owners. Users may download and/or print one copy of any article(s) in LSE Research Online to facilitate their private study or for non-commercial research. You may not engage in further distribution of the material or use it for any profit-making activities or any commercial gain. You may freely distribute the URL (http://eprints.lse.ac.uk) of the LSE Research Online website. This document is the author’s final accepted version of the journal article. There may be differences between this version and the published version. You are advised to consult the publisher’s version if you wish to cite from it. Institutions, History and Wage Bargaining Outcomes: International Evidence from the Post-World War Two Era Chris Minnsa and Marian Rizovb aDepartment of Economic History, London School of Economics, London, United Kingdom; bDepartment of Economics, Middlesex University Business School, London, United Kingdom (Submitted 29th September 2013; accepted 16 July 2014) Abstract This paper uses international evidence to assess the impact of tripartism and other forms of government involvement in bargaining on wage moderation and wage dispersion. -
Welfare Economic Foundation of Hoarding Loss by Money Circulation Optimization
Munich Personal RePEc Archive Welfare economic foundation of hoarding loss by money circulation optimization Miura, Shinji Independent 13 August 2018 Online at https://mpra.ub.uni-muenchen.de/88443/ MPRA Paper No. 88443, posted 20 Aug 2018 10:07 UTC Welfare economic foundation of hoarding loss by money circulation optimization Shinji Miura (Independent. Gifu, Japan) Abstract Saving brings an economic loss. This is one of the basic propositions of the under-consumption theory. This paper aims to give a welfare economic foundation of this proposition through an optimization method considering money circulation in the case where a type of saving is limited to hoarding. If price is fixed, a non-hoarding state is a necessary condition for Pareto efficiency. However, individual agents who prefer future expenditure hoard money, thus individual rational behavior brings about a Pareto inefficient state. This irrationality of rationality occurs because of a qualitative difference of the budget constraint between the whole society and an individual agent. The former’s constraint incorporates a truth that hoarding decreases other’s revenue, whereas the latter’s does not. Selfish individual agents make a decision with an ignorance of this relational truth because their interest is limited to their private range. As a result, agents fall into an irrational situation despite their rational judgment. Keywords: Money Circulation, Welfare Economics, Under-Consumption, Paradox of Thrift, Intertemporal Choice. 1. Introduction Saving brings an economic loss even though it is often regarded as a virtue. This proposition, known as the paradox of thrift, is one of main elements of the under-consumption theory. -
What Have We Learned? Macroeconomic Policy After the Crisis
What Have We Learned? What Have We Learned? Macroeconomic Policy after the Crisis edited by George Akerlof, Olivier Blanchard, David Romer, and Joseph Stiglitz The MIT Press Cambridge, Massachusetts London, England © 2014 International Monetary Fund and Massachusetts Institute of Technology All rights reserved. No part of this book may be reproduced in any form by any elec- tronic or mechanical means (including photocopying, recording, or information storage and retrieval) without permission in writing from the publisher. Nothing contained in this book should be reported as representing the views of the IMF, its Executive Board, member governments, or any other entity mentioned herein. The views expressed in this book belong solely to the authors. MIT Press books may be purchased at special quantity discounts for business or sales promotional use. For information, please email [email protected]. This book was set in Sabon by Toppan Best-set Premedia Limited, Hong Kong. Printed and bound in the United States of America. Library of Congress Cataloging-in-Publication Data What have we learned ? : macroeconomic policy after the crisis / edited by George Akerlof, Olivier Blanchard, David Romer, and Joseph Stiglitz. pages cm Includes bibliographical references and index. ISBN 978-0-262-02734-2 (hardcover : alk. paper) 1. Monetary policy. 2. Fiscal policy. 3. Financial crises — Government policy. 4. Economic policy. 5. Macroeconomics. I. Akerlof, George A., 1940 – HG230.3.W49 2014 339.5 — dc23 2013037345 10 9 8 7 6 5 4 3 2 1 Contents Introduction: Rethinking Macro Policy II — Getting Granular 1 Olivier Blanchard, Giovanni Dell ’ Ariccia, and Paolo Mauro Part I: Monetary Policy 1 Many Targets, Many Instruments: Where Do We Stand? 31 Janet L. -
Wage Restraint, Employment, and the Legacy of the General Theory's
Wage Restraint, Employment, and the Legacy of the General Theory’s Chapter 19 Oliver Landmann University of Freiburg i.Br. 1. Introduction The role of wages in the determination of aggregate employment remains one of the most hotly debated public policy issues in many European countries, and in Germany in particular. This is not surprising in view of the high-profile collective bargaining process in which organized labor and employers negotiate over wages under conditions of persistent high unemployment. Of course, neither side wishes to be seen as merely pursuing its narrow self-interest. Both employers and unions make every effort to argue as convincingly as possible that their respective bargaining positions are conducive to employment growth and macroeconomic stability. Employers invoke neoclassical labor market theory to reject any demands for wage increases in excess of labor productivity growth. Such wage increases, they argue, mean rising labor costs and hence cause job losses. Unions, in contrast, emphasize demand-side repercussions and appeal to the keynesian notion of the circular flow of income. They maintain that any attempt to boost employment through wage restraint is doomed to fail, mainly because this would reduce the purchasing power of consumers and thus domestic demand. Accordingly, they tend to put the blame for high unemployment on misguided fiscal and monetary policies. In contrast, the mainstream consensus regards the longer-term trends of output and employment as supply-determined and, therefore, rejects demand-side explanations of unemployment, except for the very short-run cyclical movements. Keynes (1936) devoted an entire chapter of his General Theory, the famous Chapter 19, to the macroeconomic effects of changes in money-wages. -
The Paradox of Thrift
ECONOMICS PAGE ONE NEWSLETTER the back story on front page economics May I 2012 Wait, Is Saving Good or Bad? The Paradox of Thrift E. Katarina Vermann, Research Associate “[Saving] is a paradox because in kindergarten we are all taught that thrift is always a good thing.”1 —Paul A. Samuelson, first American to win the Nobel Prize in Economics (1970) People save for various reasons. Some save with a specific purchase in mind, such as cos- metic surgery or a Porsche, while others save just to have more money. Economists say that individuals save to buy durable goods and/or accumulate wealth to maintain a certain lifestyle during retirement or in times of financial uncertainty. These reasons all confer benefits to a saver. In the near term, the saver can finally buy the latest and greatest gadget, and in the long term, the saver can be more financially secure during retirement or unplanned unemployment. Normally, personal saving declines during recessions because people want to maintain their existing level of consumption. During the Great Recession, though, saving increased. The chart shows the personal saving rate, the year-over-year growth rate of gross domestic prod- uct (GDP), and recession periods from 2000 to 2011. Before the Great Recession, the average saving rate for the typical American household was 2.9 percent. Since the recession started in 2007, the average saving rate has risen to 5.0 percent. This increase was largely driven by uncer- Source: Bureau of Economic Analysis, Naonal Bureau of Economic Research, and FRED. Recession Average Saving Rate GDP Growth Personal Saving Rate 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2011 -6 -4 -2 0 Percent 2 4 6 Great Recession 8 U.S. -
Monetary Policy
Monetary Policy Introduction to Monetary Policy • Reemphasize Chapter 13's points:The Fed's Board of Governors formulates policy, and twelve Federal Reserve Banks implement policy. • The fundamental objective of monetary policy is to aid the economy in achieving full-employment output with stable prices. o To do this, the Fed changes the nation's money supply. o To change money supply, the Fed manipulates size of excess reserves held by banks. • Monetary policy has a very powerful impact on the economy, and the Chairman of the Fed's Board of Governors, Alan Greenspan currently, is sometimes called the second most powerful person in the U.S. Consolidated Balance Sheet of the Federal Reserve Banks • The assets on the Fed's balance sheet contains two major items. o Securities which are federal government bonds purchased by Fed, and o Loans to commercial banks (Note: again commercial banks term is used even though the chapter analysis also applies to other thrift institutions.) • The liability side of the balance sheet contains three major items. o Reserves of banks held as deposits at Federal Reserve Banks, o U.S. Treasury deposits of tax receipts and borrowed funds, and o Federal Reserve Notes outstanding, our paper currency. The Fed has Three Major "Tools" of Monetary Policy • Open-market operations refer to the Fed's buying and selling of government bonds. o Buying securities will increase bank reserves and the money supply (see Figure 15-1). o If the Fed buys directly from banks, then bank reserves go up by the value of the securities sold to the Fed. -
The New Paradox of Thrift: Financialisation, Retirement Protection, and Income Polarisation in Hong Kong
China Perspectives 2014/1 | 2014 Post-1997 Hong Kong The New Paradox of Thrift: Financialisation, retirement protection, and income polarisation in Hong Kong Kim Ming Lee, Benny Ho-pong To and Kar Ming Yu Electronic version URL: http://journals.openedition.org/chinaperspectives/6363 DOI: 10.4000/chinaperspectives.6363 ISSN: 1996-4617 Publisher Centre d'étude français sur la Chine contemporaine Printed version Date of publication: 1 March 2014 Number of pages: 5-14 ISSN: 2070-3449 Electronic reference Kim Ming Lee, Benny Ho-pong To and Kar Ming Yu, « The New Paradox of Thrift: », China Perspectives [Online], 2014/1 | 2014, Online since 01 January 2017, connection on 28 October 2019. URL : http:// journals.openedition.org/chinaperspectives/6363 ; DOI : 10.4000/chinaperspectives.6363 © All rights reserved Special feature China perspectives The New Paradox of Thrift Financialisation, retirement protection, and income polarisation in Hong Kong KIM MING LEE, BENNY HO-PONG TO, AND KAR MING YU ABSTRACT: The Hong Kong SAR government has always been proud of the fact that Hong Kong retains its top ranking in terms of “mar - ket freedom” according to most international rating agencies and think tanks. What the government has been much more reluctant to recognise is that, more than 15 years after the handover, Hong Kong now also tops other developed economies in terms of income ine - quality. The growing inequality is caused, among other things, by worsening poverty among the aged. This paper attempts to provide an updated analysis of income and wealth polarisation in Hong Kong, with a particular focus on the retirement protection policy and old-age poverty. -
Power, Platforms and the Free Trade Delusion
Trade and Development Report 2018: Power, Platforms and the Free Trade Delusion Addendum UNDERSTANDING THE GLOBAL ECONOMY ∗ WITH THE UN GLOBAL POLICY MODEL ∗ This UNCTAD Technical Addendum to the Trade and Development Report 2018: Power, Platforms and the Free Trade Delusion was prepared by external consultant Prof. Amitava Dutt (Department of Political Science, University of Notre Dame, USA and FLACSO-Ecuador), with guidance of UNCTAD’s Senior staff members. This paper has not been formally edited. - 1 - 1. Injections and leakages and financing For understanding the growth of an economy, it is useful to start with an accounting identity that shows how final production (net of intermediate goods that are used up in production) of a region, or its Gross Domestic Product (GDP), is purchased by different sectors of the economy, that is, = + + + , where Y is total production, C is consumption, mostly purchased − by households, I is investment, mostly purchases by firms, G is government expenditure on goods and services, E is exports and M imports. This production identity shows that goods and services produced must end up as consumption, investment (which is mostly for adding to the stock of productive capital), government expenditure and exports, with imports subtracted because part of the first three items may represent purchases of what is produced abroad. The value of what is produced is equal to the value of income, and income can be consumed, saved, or taxed. From this we get the income identity = + + , where S is private saving and T is taxes (less transfers), we can use the production identity to get ( ) + ( ) + ( ) = 0, which we will refer to as the identity −. -
Paradoxes Situations That Seems to Defy Intuition
Paradoxes Situations that seems to defy intuition PDF generated using the open source mwlib toolkit. See http://code.pediapress.com/ for more information. PDF generated at: Tue, 08 Jul 2014 07:26:17 UTC Contents Articles Introduction 1 Paradox 1 List of paradoxes 4 Paradoxical laughter 16 Decision theory 17 Abilene paradox 17 Chainstore paradox 19 Exchange paradox 22 Kavka's toxin puzzle 34 Necktie paradox 36 Economy 38 Allais paradox 38 Arrow's impossibility theorem 41 Bertrand paradox 52 Demographic-economic paradox 53 Dollar auction 56 Downs–Thomson paradox 57 Easterlin paradox 58 Ellsberg paradox 59 Green paradox 62 Icarus paradox 65 Jevons paradox 65 Leontief paradox 70 Lucas paradox 71 Metzler paradox 72 Paradox of thrift 73 Paradox of value 77 Productivity paradox 80 St. Petersburg paradox 85 Logic 92 All horses are the same color 92 Barbershop paradox 93 Carroll's paradox 96 Crocodile Dilemma 97 Drinker paradox 98 Infinite regress 101 Lottery paradox 102 Paradoxes of material implication 104 Raven paradox 107 Unexpected hanging paradox 119 What the Tortoise Said to Achilles 123 Mathematics 127 Accuracy paradox 127 Apportionment paradox 129 Banach–Tarski paradox 131 Berkson's paradox 139 Bertrand's box paradox 141 Bertrand paradox 146 Birthday problem 149 Borel–Kolmogorov paradox 163 Boy or Girl paradox 166 Burali-Forti paradox 172 Cantor's paradox 173 Coastline paradox 174 Cramer's paradox 178 Elevator paradox 179 False positive paradox 181 Gabriel's Horn 184 Galileo's paradox 187 Gambler's fallacy 188 Gödel's incompleteness theorems