POLI-1090 - Says Law When the available pool of loanable...

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Say’s Law When the available pool of loanable funds is low, interest rates will be so high it would discourage income earners from saving so immediate consumption will increase.- idk. John Maynard Keynes' Position: Unemployment Equilibrium Yes supply and demand tend to equate at the point of equilibrium, but the resulting stability doesn't mean the economy is in full employment. In a hypothetical economy whose potential GDP is 100 units of production, equilibrium can occur at less than potential GDP levels of, say, 70-80 units when all that is produced is purchased by consumers. Therefore there is the potential of Unemployment Equilibrium ; equilibrium co-existing with lots of unemployment and underutilization of resources Prices may be flexible up and down, but wages and prices tend to be generally flexible only in one direction, upwards. How often do workers accept pay-cuts whenever company profits are down? o And while prices may fall to promote sales, often those lower sales' prices are phony prices. The Flexibility of Prices and Wages o Neoclassical Economic Position o That all prices and wages are flexible, that is moving upwards and downwards. o In a money economy, the flexible cost of goods and services will always keep the economy stable or in a balance. A. Scenario One: productivity is low (threat of recession): prices and wages will fall including interest rate, the cost of borrowing money; investors will be encourages to borrow to invest in new business; new business means new hiring of workers and the economy will grow itself out of recession. US GGE as a Ration of GDP' o The general government expenditure (GGE) as a percentage of the overall US ecnomy (GDP) has: A. Been increasing through the 20th century B. With sharp increases during the two World Wars, it reached a peak of 46% in 1918 and 61% in / C. Throughout the 1980's On one hand, the role of government as the manager of the macro-economy has became so fashionable that each US Pres. Since Roosevelt has in one form or another implemented a macro- economic policy , most of them in support of macroeconomics, but for President Reagan , to undo the effects of macro economics. o
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POLI-1090 - Says Law When the available pool of loanable...

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