The theory of multiplier and acceleration principle chapter 3Nayan Vaghela
The theory of multiplier and acceleration principle chapter 3, functioning of investment multiplier, the process of income generation through multiplier, acceleration principle, limitations of multiplier and acceleration.
The classical doctrine—that the economy is always at or near the natural level of real GDP (full employment)—is based on two firmly held beliefs:
The assumption of the full employment of labour and other productive resources
Belief that prices, wages, and interest rates are flexible.
Keynesian Theory
The theory of multiplier and acceleration principle chapter 3Nayan Vaghela
The theory of multiplier and acceleration principle chapter 3, functioning of investment multiplier, the process of income generation through multiplier, acceleration principle, limitations of multiplier and acceleration.
The classical doctrine—that the economy is always at or near the natural level of real GDP (full employment)—is based on two firmly held beliefs:
The assumption of the full employment of labour and other productive resources
Belief that prices, wages, and interest rates are flexible.
Keynesian Theory
This slide contains:
Incidence of Tax, its shift-ability, effect of residental status of assesse on taxability of income, effect on tax in different demand situations.
Equilibrium of firm and Industry under Perfect CompetitionBikash Kumar
Macro Economics
For downloading this contact- bikashkumar.bk100@gmail.com
Prepared by Students of University of Rajshahi
Md. Sultan Mahmud
Md. Shaon Mollah
Md. Mamun Miah
Md. Abid Hasan
Shimul Kumar Mondal
Liquidity Preference Theory suggests that investors demand higher interest rates or additional premiums for medium or long-term maturities and investments. Simply put, interest rates directly indicate the price of the money.
https://efinancemanagement.com/investment-decisions/liquidity-preference-theory
This slide contains:
Incidence of Tax, its shift-ability, effect of residental status of assesse on taxability of income, effect on tax in different demand situations.
Equilibrium of firm and Industry under Perfect CompetitionBikash Kumar
Macro Economics
For downloading this contact- bikashkumar.bk100@gmail.com
Prepared by Students of University of Rajshahi
Md. Sultan Mahmud
Md. Shaon Mollah
Md. Mamun Miah
Md. Abid Hasan
Shimul Kumar Mondal
Liquidity Preference Theory suggests that investors demand higher interest rates or additional premiums for medium or long-term maturities and investments. Simply put, interest rates directly indicate the price of the money.
https://efinancemanagement.com/investment-decisions/liquidity-preference-theory
The fundamental principle of the classical theory is that the economy is self‐regulating. Classical economists maintain that the economy is always capable of achieving the natural level of real GDP, which is the level of real GDP that is obtained when the economy's resources are fully employed.
National output or income was determined by real factors such as capital stock, state of technology, labour supply and in no way was affected by the general price level which was determined by the quantity of money. This classical doctrine is generally referred to as classical dichotomy.
While circumstances arise from time to time that cause the economy to fall below or to exceed the natural level of real GDP, self‐adjustment mechanisms exist within the market system that work to bring the economy back to the natural level of real GDP.
The classical doctrine—that the economy is always at or near the natural level of real GDP (full employment)—is based on two firmly held beliefs:
The assumption of the full employment of labour and other productive resources
Belief that prices, wages, and interest rates are flexible.
The general over production, and hence general unemployment, is impossible.
The normal situation is stable equilibrium at full employment.
The classical economist believe that the policy of laissez-faire guaranteed normal full employment. They had great faith in free and perfect competition, efficacy of the profit motive and price mechanism to remedy the temporary ills of the economic system and ensure full employment.
Prof. Pigou says, “With perfectly free competition, there will always be at work a strong tendency for wage rates to be so related to demand that everybody is employed.”
They treated money as a mere medium of exchange. (Transaction motive)
Class Lecture Notes Measuring the MacroeconomyProfessor Shari Lyman,.docxmccormicknadine86
Class Lecture Notes Measuring the MacroeconomyProfessor Shari Lyman, Ph.D.
GDP Measures
GDP is Gross Domestic Product
GDP is the value of all final goods and services produced within a country’s borders by its own citizens or foreign citizens in a given time period.
GNP is Gross National Product
GNP is the value of all final goods and services produced by a country’s citizens within the country’s borders or in foreign lands in a given time period. http://www.diffen.com/difference/GDP_vs_GNP
Intermediate goods are used to produce other goods. For example, when Pizza Hut buys cheese to produce pizzas, the cheese is an intermediate good.
Final goods are purchased by the end user. When the Lyman household purchases cheese, the cheese is a final good.
GDP is represented by the variable Y in macroeconomic calculations.
The formula for GDP is:
Y=Consumption(C)+Investment(I)+Government Expenditures(G)+Net Exports(X-M).
Consumption (durable and non-durable goods and services for individual household consumption)
Investment (Consumption of new physical capital and new housing such as factories, machines, tools, transportation systems, new houses, etc.) Investment is purchased using financial capital instruments.
Government expenditures (all Federal, State, and Local government purchases from paper clips to aircraft carriers).
Net Exports (Trade Balance=Exports-Imports)
Macroeconomic Measures introduces the student to 3 different methods of measuring GDP:
1.the incomes approach (simplified circular flow model-resource flow approach)
2.the expenditures approach (simplified circular flow model (D) money flow approach)
3.the output approach (simplified circular flow model (S) product flow approach).
Incomes Approach (Input/resource approach)
GDP (also known as national income which is indicated by Y) is equal to the inputs used in the production process. The inputs include:
land in the form of rent
labor in the form of wages
capital in the form of interest
entrepreneurship in the form of profit.
Y = rent + wages + interest + profit.
Expenditures Approach (Demand side approach)
GDP (also known as aggregate demand (AD) which is indicated by Y) is equal to the total output demanded in the economy. The outputs include:
consumption
investment
government expenditures
net exports
Y=Consumption(C)+Investment(I)+Government Expenditures(G)+Net Exports(X-M)
Output Approach (Supply side approach)
GDP (also known as national output which is indicated by Y) is equal to the outputs supplied to the economy. The outputs include:
household goods (durable and nondurable goods and services)
investment goods (new housing and capital)
government (durable and nondurable goods and services)
net exports (goods for export minus goods imported)
Y = Household (C) + Firm and HH (I) + (G) + Net Exports (X-M)
The Keynesian Consumption (Spending) Multiplier
The Keynesian Consumption Multiplier is based on the assumption that for each additional dollar a household receives some ...
The Expenditure ApproachIn Week #5, we discussed how severe down.docxmehek4
The Expenditure Approach
In Week #5, we discussed how severe downturns in the economy can eventually be destructive and end up as an economic depression, such as that of the 1930's called the Great Depression.
· Severe drops in output, relative high real unemployment, economic contraction, and apathy occur during severe recessions and periods of economic depression.
One famous economist who was called upon to address the economic malaise of the 1930's period was JohnMaynardKeynes. Published in 1933, The Means to Prosperity was Keynes' economic theories and ideas about government responsibility and authority on how to revive a sluggish economy.
The Expenditure Approach derives GDP by taking consumption (C) and adding business investment (I) and adding government expenditures of goods and services (G) and adding net exports (exports - imports). To Keynes, C + I is equal to aggregate demand, and equilibrium is the result of aggregate spending (C + I + G + NX) being equal to total economic output. If total spending is less than it would be if there were full employment (no cyclical unemployment), then there will be economic recessionary pressures.
Once an economy moves out of long-run equilibrium in which long-run aggregate supply, short-run aggregate supply, and aggregate demand are in equilibrium, what happens and should happen? Keynes believed that prices and wages were sticky in the short run, but as long as aggregate spending was below full employment, there will be economic instability and supply won't change.
· Thus, the key would be to concentrate on shiftingaggregatedemand rightward back into long-run equilibrium instead of waiting for prices and wages to fall and the short-run aggregate supply curve to shift rightward to bring about long-run equilibrium.
· Although Keynes did believe that some savings was necessary for capital accumulation in the economy, savings for the most part undercuts aggregate demand and isn't channeled into the economy.
So, to Keynes, how can aggregate demand be increased to bring about long-run equilibrium? Fiscal policy. Fiscal policy is spending and taxation by the government. Keynes believed that government spending and taxation should follow business cycles.
· If, for example, the economy is recessionary and experiencing less-than-full employment, proper fiscal policy actions should be to increase spending, even going into a budget deficit, and even lowering taxes.
· Because C and I are down in a recession, raising G will help shift aggregate demand rightward, with the "right amount" of government expenditures leading to full employment and long-run equilibrium.
· If, on the other hand, for example, the economy is at full employment and aggregate expenditures are rising, then proper fiscal policy is to reduce spending, even incurring a budget surplus, and raising taxes.
In summary, John Maynard Keynes was considered an authority of economics, sought after by President FDR especially during the Great Depress ...
There are two major theories of employment (Classical and Keynesian Theories) in macroeconomics. This presentation seeks to provide an overview of the two major theories.
Customer Services, Behavioral Approach and Responsibilities of a Travel Agenc...Md Shaifullar Rabbi
Customer Services, Behavioral Approach and Responsibilities of a Travel Agency Staff...
Md Shaifullar Rabbi
Assistant Manager, Customer Support and Training Department , Sabre Travel Network Bangladesh Limited
A global distribution system (GDS) is a computerized network system owned or operated by a company that enables transactions between travel industry service providers, mainly airlines, hotels, car rental companies, and travel agencies.
Training on Ticketing and Reservation(GDS-Sabre)-RTO/RPL-NTVQF Level 2(BTEB)Md Shaifullar Rabbi
This presentation is prepared for the student of Ticketing and Reservation, NTVQF Level 2, Bangladesh Technical Education Board.
Prepared By Md Shaifullar Rabbi, Assistant Manager, Customer support and Training Department, Sabre Bangladesh & Assessor- Bangladesh Technical Education Board.
Sabre Global Distribution System, owned by Sabre Corporation, is a travel reservation system used by travel agents and companies to search, price, book, and ticket travel services provided by airlines, hotels, car rental companies, rail providers and tour operators. Originally developed by American Airlines with the assistance of IBM in 1960, the booking service became available for use by external travel agents in 1976 and became independent of the airline in March 2000.
The system's parent company is organized into three business units:
Sabre Travel Network: global distribution system
Sabre Airline Solutions: airline technology
Sabre Hospitality Solutions: hotel technology solutions
A travel document is an identity document issued by a government or international treaty organization to facilitate the movement of individuals or small groups of people across international boundaries
An itinerary is a plan of a journey showing the route and the places that the visitor will visit. Thus, it is a schedule or timetable produced in association with a package tour. It is basically designed to identify the route, day-by-day journey format, origin, destination, and all the enroute halting points, period of halts along with accommodation, mode of travel, activities and other services offered during a visitor’s tour.
A travel or tour brochure is a promotional material that advertises a destination, sightseeing attraction, or tour activity. Brochures can both inspire tourists to plan a trip as well as educate them about sights to see and things to do after they've arrived at their place of interest.
Sabre is a leading software and technology company that powers the global travel industry. With decades of revolutionary firsts, our team of experts drive innovation and ingenuity across the travel ecosystem. Sabre partners with airlines, hoteliers, agencies and other travel partners to retail, distribute and fulfill travel.
Our technology is the intelligence behind mobile apps, airport check-in kiosks, online travel sites, airline and hotel reservation networks, travel agent terminals, and scores of other travel solutions. Positioned at the center of the travel ecosystem, our platform enables our customers to connect people with experiences that matter in their lives.
Dating back to 1960, Sabre was born out of a joint initiative between American Airlines and IBM to create the world’s first computerized airline reservation system. We have since evolved into a technology ecosystem that touches almost every stage of a traveler’s experience. (Source-https://www.sabre.com/about/)
বাংলাদেশ পর্যটন করপোরেশন (বাপক) ১৯৭২ সালে মহামান্য রাষ্ট্রপতির ১৪৩ নং আদেশের মাধ্যমে প্রতিষ্ঠিত হয় এবং ১৯৭৩ সালে এর কার্যক্রম শুরুকরে। এটি বেসরকারী বিমান পরিবহন ও পর্যটন মন্ত্রণালয়ের অধীনে একটি স্বায়ত্বশাসিত প্রতিষ্ঠান।
Tour Operators Association of Bangladesh (TOAB) was formed in the year of 1992. This was the time when a handful of agencies operating tours inside Bangladesh, felt the need of such an association or trade body to overcome immense problems and difficulties being faced by them regularly. Besides this, the other main objective or aim of the organization was to develop and nourish tourism in Bangladesh and to promote the tourism products of Bangladesh in the international arena. After a long wait and completion of different formalities, the association was recognized as a trade organization by the Ministry of Commerce, Government of the People's Republic of Bangladesh in 2002. Currently, TOAB is having 751 active Members.
বাংলাদেশ একটি বৈচিত্র্যপূর্ণ পর্যটন সম্ভাবনাময় দেশ। বর্তমান বিশ্বে পর্যটন শিল্প একক বৃহত্তম অর্থনৈতিক কর্মকান্ড হিসেবে প্রতিষ্ঠা লাভ করেছে। পাশাপাশি এই শিল্পটি তার বহুমাত্রিক বৈশিষ্ঠ্যতার কারণে বিভিন্ন দেশে অর্থনৈতিক উন্নয়নের সাথে সাথে ব্যাপক কর্মসংস্থানের সুযোগ সৃষ্টি করেছে। অফুরন্ত প্রাকৃতিক সৌন্দর্যমন্ডিত বাংলাদেশে পর্যটন শিল্প খুবই সম্ভাবনাময়। পৃথিবীর যে কোন পর্যটককে আকৃষ্ট করার মত সকল পর্যটন আকর্ষণীয় উপাদান বাংলাদেশে বিদ্যমান। অপার সম্ভাবনাময় বাংলাদেশের পর্যটন শিল্পকে বিশ্বব্যাপী প্রচারের উদ্দেশ্যে এবং আমাদের এই সোনার বাংলাকে বিশ্ব দরবারে একটি ‘পর্যটন গন্তব্য’ হিসেবে প্রতিষ্ঠা করার লক্ষ্যে গণপ্রজাতন্ত্রী বাংলাদেশ সরকারের মাননীয় প্রধানমন্ত্রী শেখ হাসিনা’র নেতৃত্বে বর্তমান গণতান্ত্রিক সরকার পর্যটন আইন-২০১০-এর মাধ্যমে ২০১০ সালের সেপ্টেম্বর মাসে জাতীয় পর্যটন সংস্থা হিসেবে বাংলাদেশ ট্যুরিজম বোর্ড (বিটিবি) গঠন করেছে। পর্যটন শিল্পের উন্নয়ন এবং দেশের অর্থনীতিতে পর্যটন শিল্পের ক্রমবর্ধমান অবদানকে আরও শক্তিশালী করণ, সর্বোপরি বর্হি:বিশ্বে দেশের ভাবমুর্তি উন্নয়নের জন্য অন্যান্য দেশের ন্যায় জাতীয় পর্যটন সংস্থা (National Tourism Organization) বাংলাদেশ ট্যুরিজম বোর্ড প্রতিষ্ঠার পর থেকেই ব্যাপক প্রচার ও বিপণনের লক্ষ্যে নিরলস কাজ করে যাচ্ছে। Source- http://www.tourismboard.gov.bd/site/page/039c81b0-e8d4-4627-8f3e-f6c4a711b7e7/-
Want to move your career forward? Looking to build your leadership skills while helping others learn, grow, and improve their skills? Seeking someone who can guide you in achieving these goals?
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Watch this to learn:
* Overview of the PMISSC Mentoring Program: Mission, vision, and objectives.
* Benefits for Volunteer Mentors: Professional development, networking, personal satisfaction, and recognition.
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Learn how you can make a difference in the project management community and take the next step in your professional journey.
About Hector Del Castillo
Hector is VP of Professional Development at the PMI Silver Spring Chapter, and CEO of Bold PM. He's a mid-market growth product executive and changemaker. He works with mid-market product-driven software executives to solve their biggest growth problems. He scales product growth, optimizes ops and builds loyal customers. He has reduced customer churn 33%, and boosted sales 47% for clients. He makes a significant impact by building and launching world-changing AI-powered products. If you're looking for an engaging and inspiring speaker to spark creativity and innovation within your organization, set up an appointment to discuss your specific needs and identify a suitable topic to inspire your audience at your next corporate conference, symposium, executive summit, or planning retreat.
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We are a branch of the Project Management Institute. We offer a platform for project management professionals in Silver Spring, MD, and the DC/Baltimore metro area. Monthly meetings facilitate networking, knowledge sharing, and professional development. For event details, visit pmissc.org.
New Explore Careers and College Majors 2024.pdfDr. Mary Askew
Explore Careers and College Majors is a new online, interactive, self-guided career, major and college planning system.
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Just a game Assignment 3
1. What has made Louis Vuitton's business model successful in the Japanese luxury market?
2. What are the opportunities and challenges for Louis Vuitton in Japan?
3. What are the specifics of the Japanese fashion luxury market?
4. How did Louis Vuitton enter into the Japanese market originally? What were the other entry strategies it adopted later to strengthen its presence?
5. Will Louis Vuitton have any new challenges arise due to the global financial crisis? How does it overcome the new challenges?Assignment 3
1. What has made Louis Vuitton's business model successful in the Japanese luxury market?
2. What are the opportunities and challenges for Louis Vuitton in Japan?
3. What are the specifics of the Japanese fashion luxury market?
4. How did Louis Vuitton enter into the Japanese market originally? What were the other entry strategies it adopted later to strengthen its presence?
5. Will Louis Vuitton have any new challenges arise due to the global financial crisis? How does it overcome the new challenges?Assignment 3
1. What has made Louis Vuitton's business model successful in the Japanese luxury market?
2. What are the opportunities and challenges for Louis Vuitton in Japan?
3. What are the specifics of the Japanese fashion luxury market?
4. How did Louis Vuitton enter into the Japanese market originally? What were the other entry strategies it adopted later to strengthen its presence?
5. Will Louis Vuitton have any new challenges arise due to the global financial crisis? How does it overcome the new challenges?
This comprehensive program covers essential aspects of performance marketing, growth strategies, and tactics, such as search engine optimization (SEO), pay-per-click (PPC) advertising, content marketing, social media marketing, and more
2. Presented By:
Md. Shaifullar Rabbi
BBA & MBA (Major in THM,FBS,DU)
Coordinator & Lecturer
Dept. of Tourism & Hospitality Management
Daffodil Institute of IT(NU)
3. Income and Employment Theory
Income and employment theory, a body of economic
analysis concerned with the relative levels of output,
employment, and prices in an economy. By defining the
interrelation of these macroeconomic factors,
governments try to create policies that contribute to
economic stability.
Two Important Theories of Income and Employment: Two
important theories of income and employments are:
1. Classical Theory of Income and Employment
2.2. Keynesian Theory of Income and Employment!
4. Classical Theory of Income and Employment
The theory is ascribed to early
Classical economists like Adam
Smith, Ricardo, and Malthus and
neo-classical like Marshall, Pigou
and Robbins.
They believe-
1. An economy, as a whole, always
function at level of full
employment
2. Supply creates it own demand
3. Flexible system of prices, interest
5. Keynesian Theory of Income and Employment
With this background, Keynes, a British
Economist, propounded his own theory and in
1936, brought out his famous book “General
Theory of Income, Interest and Money” which
brought about a revolution in economic
thought. This led to the emergence of
Macroeconomics as a separate branch of
economics.
1. An economy can be equilibrium even at less
than full employment level
2. Demand creates its own supply
3. Equilibrium of income and employment is
determined by aggregate demand and
aggregate supply
6. Effective Demand
Effective demand represents that aggregate demand or
total spending (consumption expenditure and investment
expenditure) which matches with aggregate supply
(national income at factor cost).
In other words, effective demand is the signification of the
equilibrium between aggregate demand (C+I) and
aggregate supply (C+S). This equilibrium position (effective
demand) indicates that the entrepreneurs neither have a
tendency to increase production nor a tendency to
decrease production. It implies that the national income
and employment which correspond to the effective
demand are equilibrium levels of national income and
employment.
7. Determinants of Income
The determinants of effective demand and so of equilibrium level of
national income and employment are the aggregate demand and
aggregate supply.
(1)Aggregate Demand : Aggregate demand refers to the sum of
expenditure, households, firms and the government is undertaking on
consumption and investment in an economy. The aggregate demand
price is the amount of money which the entrepreneurs expect to
receive as a result of the sale of output produced by the employment
of certain number of workers.
(2)Aggregate Supply : The aggregate supply refers to the flow of output
produced by the employment of workers in an economy during a short
period. In other words, the aggregate supply is the value of final output
valued at factor cost. The aggregate supply price is the minimum
amount of money which the entrepreneurs must receive to cover the
8. Determination of Level of Employment and Income
According to Keynes, the equilibrium levels of national income
and employment are determined by the interaction of
aggregate demand curve (AD) and aggregate supply curve
(AS). The equilibrium level of income determined by the equality
of AD and AS does not necessarily indicate the full employment
level. The equilibrium position between aggregate demand and
aggregate supply can be below or above the level of full
employment as is shown in the curve.
In figure (32.3), the aggregate demand curve (C+l), intersects
the aggregate supply curve (OS) at point E1 which is an effective
demand point. At point E1, the equilibrium of national income is
OY1. Let us assume that in the generation of OY1 level of income,
some of the workers willing to work have not been absorbed. It
means that E1 (effective demand point) is an under employment
equilibrium and OY1 is under employment level of income.
The unemployed workers can be absorbed if the level of output
can be increased from OY1 to OY2 which we assume is the full
employment level. We further assume that due to spending by
the government, the aggregate demand curve (C+I+G) rises. As
a result of this, the economy moves from lower equilibrium
point E1 to higher equilibrium point E2. The OY is now the new
equilibrium level of income along with full employment. Thus E2
denotes full employment equilibrium position of the economy.
Thus government spending can help to achieve full
employment. In case the equilibrium level of national income is
above the level of full employment, this means that the output
has increased in money terms only. The value of the output is
9. Importance of Effective Demand
The principle of effective demand is the most important contribution of J.M. Keynes. Its
importance in macro economics, in brief, is as under:
(i) Determinant of employment. Effective demand determines the level of employment in
the country. As effective demand increases employment also increases. When effective
demand falls, the level of employment also decreases.
(ii) Say's Law falsified. It is with the help of the principle of effective demand that Says Law
of Market has been falsified. According to the concept of effective demand whatever is
produced in the economy is not automatically consumed. It is partly saved. As a result,
the existence of full employment is not possible.
(iii) Role of investment. The principle of effective demand explains that for achieving full
employment level, real investment must equal to the gap between income and
consumption. In other words, employment cannot expand, unless investment expands.
Therein lies the importance of the concept of effective demand.
(iv) Capitalistic economy. The principle of effective demand makes clear that in a rich
community, the gap between income and expenditure is large. If required investment is
not made to fill this gap, it will lead to deficiency of effective demand resulting in
unemployment.
10. Criticism on Keynesian Theory
From mid 1970 onward, the Keynesian theory of employment came under
sharp criticism from the monetarists. Milton Frsadman, the Chief advocate
of monetarists rejected the Keynesianism as a whole. The monetarists
returned back to the old classical theory for the explanation of the rise in
general price level and stated that inflation is always and every where a
monetary phenomenon.
The monetarists are of the view that J. M. Keynes laid more emphasis on
the determinants of aggregate demand and to a greater extent ignored
the determinants of aggregate supply. The monetarists encouraged the
supply side policy and thus favored free enterprise economy for solving
the problems of unemployment and inflation.
J. R. Hicks describes Keyne's 'General Theory' as depression economics.
Further, the 'General Theory of Keynes is applicable to the developed
economies. The Keynesians concepts are not very useful for policy
11. What is considered full employment in
the United States?
A government or economy often defines full
employment as any rate of unemployment
below a defined number. If, for example, a
country sets full employment at a 5%
unemployment rate, any level of unemployment
below 5% is considered acceptable. Full
employment, once attained, often results in an
12. Policies that help to achieve full employment
1. The Federal Reserve Board needs to target a full employment with wage growth
matching productivity: The most important economic policy decisions being made about
job growth in the next few years are those of the Federal Reserve Board as it determines
the scale and pace at which it raises interest rates.
2. Targeted employment programs : Even at 4 percent unemployment, there will be many
communities that will still be suffering substantial unemployment, especially low-wage
workers and many black and Hispanic workers. To obtain full employment for all, we will
need to undertake policies that can direct jobs to areas of high unemployment.
3. Public investment and infrastructure : There is widespread agreement that we face a
substantial shortfall of public investment in transportation, broadband, R&D, and
education. Undertaking a sustained (for at least a decade) program of public investment
can create jobs and raise our productivity and growth. In the early years this program
would most effectively create jobs if we borrowed to finance it, but as we approach full
employment we can raise revenues to cover its costs.
13. Policies that do not help us reach full employment
1.Corporate tax reform: There are many false claims that corporate tax reform is needed
to make us competitive and bring us growth. First off, the evidence is that the corporate
tax rates U.S. firms actually pay (their “effective rates”) are not higher than those of other
advanced countries. Second, the tax reform that is being discussed is “revenue neutral,”
necessarily meaning that tax rates on average are actually not being reduced; for every
firm or sector that will see a lower tax rate, another will see a higher tax rate.
2. Cutting taxes: There will surely be many efforts in this Congress to cut corporate taxes
and reduce taxes on capital income (e.g., capital gains, dividends) and individual marginal
tax rates, especially on those with the highest incomes. It’s easy to see how those
strategies will not work.
3. Raising interest rates: There are those worried about inflation who are calling on the
Federal Reserve Board to raise interest rates soon and steadily thereafter. Their fears are,
in my analysis, unfounded. But we should be clear that those seeking higher interest rates
are asking our monetary policymakers to slow economic growth and job creation and
reflect a far-too-pessimistic assumption of how far we can lower unemployment,
seemingly aiming for unemployment at current levels or between 5.0 and 5.5 percent.
14. Inflationary Gap
It is useful and important to understand the concept
of inflationary gap because with it we are able to
know the main cause of the rise in general level of
prices. The equilibrium of an economy is established
at the level of full-employment when aggregate
demand or total expenditure is equal to the level of
income corresponding to full-employment. This
happens when the amount of investment is equal to
the saving gap corresponding to full-employment
level of income.
15. Deflationary Gap
In the theory of income and employment, the
concept of deflationary gap occupies an
important place, since in a capitalist economy
unemployment and depression occur due to this
gap. According to Keynesian theory of income
and employment, equilibrium at the level of full-
employment is established when aggregate
demand consisting of consumption demand plus
investment demand plus government demand (C
+ I + G) is equal to the national income at the