John Maynard Keynes classical approach to economics and the business cycle has dominated society, especially the United States. His idea was that government intervention was necessary in a properly functioning economy. One economic author, John Edward King, claimed of the theory that:
In conclusion, regardless of Macropoland’s current economic condition, it is fair to say that it is all part of the business cycle. The business cycle has three parts: peak, trough, and peak. The peak is the date that the recession starts. In Macropoland’s case, the peak would be at the beginning of 1973, its trough somewhere between 1973 and 1974, and then its peak again at 1974. In the second scenario, Macropoland is either at its trough, where it is about to head up again because of its low inflation rate, or it is at its expansion, on its way to heading to its next peak.
The economic business cycle of the world is its own living and breathing entity expanding and contracting with imprecise balances involving supply and demand. The expansions and contractions also known as booms and recessions support a delicate equilibrium of checks and balances, employment and unemployment. The year 1929 marked the beginning of the downward spiral of this delicate economic balance known as The Great Depression of the United States of America. The Great Depression is by far the most significant economic event that occurred during the twentieth century making other depressions pale in comparison. As a result, it placed the world’s political and economic systems into a complete loss of credibility. What transforms an ordinary recession or business cycle into an authentic depression is a matter of dispute, which caused trepidation among economic theorists. Some claim the depression was the result of an extraordinary succession of errors in monetary procedure. Historians stress structural factors such as massive bank failures and the stock market crash; economists hold responsible monetary factors such as the Federal Reserve’s actions when they contracted the currency distribution, and Britain's attempt to return their Gold Standard to pre-World War parities. Subsequently, there are the theorists such as the monetarists, who presume that it began as a normal recession, however many policy errors by the monetary establishment forced a reduction in the money supply, which worsened the economic condition, thereby turning the normal recession into the Great Depression. Others speculate that it was a failure of the free market or a failure of the government in their efforts to regulate interest rates, slow the occ...
...tivity was under way prior to the market debacle of October 1929. In contrast, the cyclical expansion in business that followed the recession of 1981-1982 remains intact today. Moreover, examination of the Depression years can help us to identify policies that minimize the risk of a slowdown in economic activity and to avoid the major errors of the past. In this regard, the principal recommendations that emerge from our admittedly subjective review of history are:
The phrase “History repeats itself” is a commonly used paradigm when it comes to events that happen in a repetitive notion. The recession that has recently been witnessed by the millions is a great example of history repeating itself. How did it happen, did we know it was going to happen, and was there anything that could have been done to prevent it? There are a multitude of questions that could be asked, with the most important of them all, will it happen again? In just the past two hundred years, the United States has seen “Black Friday” in 1869, “The Great Depression” in 1929, and the most current recession of 2009. Recessions, depressions, inflation, economic boom, these are all terms used to describe the financial events that have taken place in the United States as far back as 1819. Known as the first major recession, an economic boom took place just after the war of 1812. According to an article in American History Magazine, most recessions that the US has seen last an average of 10 months, and reoccur on average every 4.6 years. It has become a cycle, a business cycle, one that we will most likely see several times over again during our time. These events among others that deal with financial crisis, weather it be a loss of stock or inflation of goods, have had a tremendous effect on our country, and is believed that it will happen again.
“Yes, It’s the economy, stupid, but is it demand or supply?” was published on January 24, 2014 by Paul De Grauwe for CEPS Commentary. The ‘wrong medicine’ as De Grauwe says, continually goes to the problems, but never seems to solve them correctly. Before 1970, there was a focus on demand shock, in 1970 there was a focus on demand shock for a supply shock, and in 2008-09, there is a focus on supply shock for a demand shock. Development on different models started to try to predict the shocks, and the creation of the supply-side model to replace the Keynesian model began. Repeating of old mistakes, it seemed in 2008 that the economists had not learned a thing from the 1970s. Economists do not seem to always learn from old mistakes, but in the end, sometimes it takes several repeats and misdiagnoses to get things done correctly.
The fluctuations of economic growth are known as the business cycle. The GDP is a useful indication and measurement of the fluctuations of economic contractions. The measurement of GDP can be approached from three angles: value added by industry, final expenditures, and factor incomes (2008). The first angle measures the value added created by industry; the output less and inputs purchased from other producers. The second angle measures expenditures by consumers, businesses on investment goods, government on services and goods, and foreigners for exports; minus expenditures by domestic residents on imports. The last angle measures incomes generated in production, operating surplus generated by business and compensation of employees (2008). The GDP does not remai...
ROBINSON, Joan (1965b). “The General Theory after Twenty-Five Years”. Collected Economic Papers, vol. III, pp. 100-2.
“Microeconomics and macroeconomics can be described in terms of small-scale vs. large-scale or in terms of partial vs. general equilibrium. Perhaps the most important distinction, however, is in terms of the role of equilibrium. While issues in microeconomics seldom challenge the notion of a naturally occurring equilibrium, the existence of business cycles and, especially, unemployment suggests too many observers that macroeconomics raises issues of a different character.” (McConnell & Brue, 2004).
Developments in macroeconomic policy are generally as a result of critical analysis over time and each of the Macroeconomists reviewed in this essay have provided this for their predecessors. In our current framework it is evident that the policies applied are all influenced, in part, by these economists.