Are Banks Special - Running head ARE BANKS SPECIAL Are Banks Special Brian Reed Post University ARE BANKS SPECIAL 2 Overview In all economic

Are Banks Special - Running head ARE BANKS SPECIAL Are...

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Running head: ARE BANKS SPECIAL?
ARE BANKS SPECIAL? 2OverviewIn all economic systems, without exception, the state regulates the economy. Neoclassical direction arose as a reaction to the economic teachings of K. Marx, dominated until the 30ies of the 20th century, and praised a free competition. The crisis and the Great Depression showed the impossibility of free competition to overcome contradictions, solve all socio-economic problems of society, and therefore, there was a new economic doctrine - Keynesianism, which required the severe intervention of the state in the economy. The positions of neoclassicists and Keynes are two opposite views on the market world. The neoclassical theory was dominated by a microeconomic approach, and the focus was on an economic entity (firm/household) that maximizes its profit or utility (Mankiw, 2014). Keynes highlighted the macroeconomic approach (the analysis of macroeconomic problems), the focus was on the relationship between macroeconomic variables - aggregate demand, GNP, employment, GNI, etc. (OpenStax College, 2014).Risks for the Macroeconomy if the Bank FailsThe banking system is an integral part of the modern economy; its activities are closely related to the needs of reproduction. Being in the center of economic life, serving the interests of producers, banks mediate the links between industry, commerce, agriculture, and the population. It turns out that a reliable banking system is an essential condition for the effective functioning of the entire market economy. The neoclassical concept of money is based on a quantitative theory. It says that there is a direct relationship between the amount ofmoney and the price level, that prices are determined by the amount of money in circulation, and the purchasing power of money is determined by the price level (Mankiw, 2014). In the absence of a banking system, there will be a decline in business activity and production according to the neoclassical concept. The classical theory connects demand for money mainly with the real income. The Keynesian theory considers the interest rate as the main
ARE BANKS SPECIAL?

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