Macroeconomics

Business and Marketing Name: Institution: Course: Tutor: Date of submission: Business and marketing Part 1 It is almost impossible to study economics without coming across John Maynard Keynes. He is responsible for the creation and development of modern day Keynesian economics. John Maynard`s contribution in economics is so important that without some of the principles he set forth, it would be impossible to have the level of effectiveness we enjoy in economics today. Through the works of John Maynard, there are a number of influential works that make economics what it is today. John Maynard is known as the man who literary transformed the face of the economic world. Along with Karl Marx and Adam Smith, John Maynard is listed as one of the fathers of modern day macroeconomics. He was a British economist who came up with ideas that shook up the entire framework which classical economics is built on. What he established continues to influence the fiscal and economics of the western governments long after they were established. This section of the paper aims at presenting the key theories and principles, how they were developed, and the impact they have on economics. (Minsky, 2009) The key theories and principles of John Keynes are classified into three. The three main theories deal with interest and money, the economic consequence of peace, and the general theory of employment. One of the main reasons for the establishment of the general theory of employment was to challenge one of the consensus established with regards to the relationship between employment and the economic downturn. In 1936, this theory challenged the assumption that the economy possessed a unique ability to restore itself after the downturn was over. With regards to investments and savings, Keynes had a number of theories dealing with these two elements in economics. The theory laid out by Keynes states that investments and savings are determined by forces that are independent of each other. Whereas investments are determined by the expected return laid out in interest rates, savings are mainly controlled by the level of a country`s propensity to consume. The aggregate that is established between the level of investment and consumption was labeled as the nation`s income by Keynes. According to Keynes, the government`s responsibility is to ensure that there is enough investment to keep consumption and invested stimulated at all times. (Minsky, 2009) One of the 20th century economists that made an impact in the field of macroeconomics is Joseph Schumpeter. He is known as the father of creative destruction - a process in industrialization where change comes from within and affects the entire course of the economy. He presented his principles through addressing the essence of capitalism, the impact of socio-political circumstances on the economy, and the virtues of capitalism. He has also dealt extensively with business cycles as well as entrepreneurship. Joan Violet Robinson was also a great economist of the 20th century. She did a great job with regards to the economics associated with imperfect competition. She dealt with this through the analysis of monopolistic powers in and industry and how this influences competition between the various firms in any given industry. (Minsky, 2009) Part 2 In determining Country A`s GDP, there are a number of important attributes to take into acc...