Lord John Maynard Keynes wrote the General Theory of Employment, Interest and Money as a solution to the problem of periodic unemployment faced by developed industrial nations of the West during the great depression of the thirties. Keynesian theory singles out deficiency of effective demand as the major cause of unemployment and low level of income in industrial economy operations under a laissez faire system. Deficiency of effective demand is a prominent feature of economies undergoing depression and in order to improve the level of effective demand in an economy. Keynes suggested policy measures like cheap money policy, government’s compensatory investment spending, deficit financing and other fiscal methods.… Read the rest
Economics Concepts
Causes and Effects of Inflation
By inflation one generally means rise in prices. To be more correct inflation is persistent rise in the general price level rather than a once-for-all rise in it, while deflation is persistent falling price. A situation is described as inflationary when either the prices or the supply of money are rising, but in practice both will rise together. These days economies of all countries whether underdeveloped, developing as well developed suffers from inflation. Inflation or persistent rising prices are major problem today in world. Because of many reasons, first, the rate of inflation these years are much high than experienced earlier periods.… Read the rest
Definition of Inflation – Types of Inflation
Definition of Inflation
Inflation is commonly understood as a situation of substantial and rapid general increase in the price level and consequent fall the value of money over a period of time. Inflation means persistent rise in the general level of prices. Inflation is a long term operating dynamic process. By and large, inflation is also a monetary phenomenon. It is usually characterized by an overflow of money and credit. In fact, the root cause of inflation is the expansion of money supply beyond the normal absorbing capacity of the economy. The behavior of general prices is measured through price indices.… Read the rest
Significance of Money in Modern Economic Life
Money occupies a central position in our modern economy. Money is everywhere and for everything in the modern economic life. Money has become the religion of the day in the ordinary business of life. Every branch of economic activity in a money economy is basically different from what it would have been in a barter economy. Money has created a far reaching effect on all facets of economic activities; consumption, production, exchange and distribution, as also on public finance and economic welfare.
Money and ConsumptionMoney enables a consumer to generalize his purchasing power. It gives him command over a wide variety of goods.… Read the rest
Important Functions of Money
Money is a critical component of any modern economy, serving as a medium of exchange, a store of value, and a unit of account. It is used by individuals, businesses, and governments to facilitate transactions and to manage financial resources. In this essay, we will explore the functions of money, and how it helps to facilitate economic activity.
Medium of Exchange:
One of the most important functions of money is its role as a medium of exchange. In a barter system, goods and services are exchanged directly for other goods and services, with no universal medium of exchange. However, money provides a convenient and efficient way to facilitate transactions by allowing buyers and sellers to exchange goods and services for a universally accepted form of payment.… Read the rest