early economics, the government supply the currency by minting Pg.1/56
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Nov 18, 2015
doc early economics, the government supply the currency by minting precious metalwith their stamp. No matter what the credit worthiness of the government, the worthof the currency depended on the value of its underlying precious metal. A coin wasworth its gold or silver content, as it always be melted down to this. A country’s worthand economic clout was largely to its holding of gold and silver in the nationaltreasury. Monarch, despots and even democrats tried to skirt this inviolate law byfilling down their coinage or mixing with other substances to make more coins out of the same amount of gold and silver. There were inevitably found out by the traders,money lenders and others who depended on the worth of that currency (Walsh,2001).Monetary policy is one of the tools that a national government uses to influence itseconomy. Using its monetary authority to control the supply and availability of money, a government attempt to influence the overall level of economic activity inline with its political objectives (Clarida 1999). According to Peter (1999), monetarypolicy has no specific definition in economic fields. It define the actions design tomanipulate the money supply including bank credit, in order to achieved thespecified economic objectives by duly authorized public authority, most commonly acentral bank.Modern macroeconomics is divided into two camps which is the neo or new-classicaland the new Keynesianisme theory. New Keynesian are different from the old. Thenew Kenynesian looking so much like old classical and it can be conclude that theterm “Keynesian” has out-lived its usefulness. The economist did not agree with themain goal of the monetary policy which is to attain the best performance possible. Itis because they think that the economic are always influenced by the politician.While, according to the Federal Reserve Banks, the aims of this monetary policy arethe attainment of maximum sustainable economic growth. Beside, another aim is toimprove living standard and low unemployment and also low or no inflation.(Belongia,1996)There are some assumptions in the basic principles of the new monetary policy byKeynes. The new policy are not about an exegesis of Keynes (1963). NewKeynesianism (NUKE) does not put in doubt that the insights of classical theory arehelpful for economic analysis. NUKE does not believe that capitalism is threatenedby oversaving and that must be hindered by deficit spending programs. Monetarypolicy is more powerful in fighting recession than fiscal policy, the policy undertakenshould not be discretionary but ruled based. Lastly, the monetary policy need toconsider that the inflation has it costs. NUKE do not believe that a monopolizedmoney economy is necessary. As Woodford (2001), it is quite possible that theinformation revolution strengthens and privatization of money supply. But, even insuch system, central bank would play a central role due historical networkexternalities. Therefore, a privatization of money supply does not change the NUKEbasic concept of optimal monetary policy (Gordon, 1990).In light of the empirical failure of new classical economics to give a plausibleexplanation for the occurring changes in output, employment and unemployment, itis hardly astonishing that the basic principles are virtually identical with the coreprinciples of modern macroeconomics. Firstly,
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early economics, the government supply the currency by minting precious metalwith their stamp. No matter what the credit worthiness of the government, the worthof the currency depended on the value of its underlying precious metal. A coin wasworth its gold or silver content, as it always be melted down to this. A countrys worthand economic clout was largely to its holding of gold and silver in the nationaltreasury. Monarch, despots and even democrats tried to skirt this inviolate law byfilling down their coinage or mixing with other substances to make more coins out ofthe same amount of gold and silver. There were inevitably found out by the traders,money lenders and others who depended on the worth of that currency (Walsh,2001).Monetary policy is one of the tools that a national government uses to influence itseconomy.Usingitsmonetaryauthoritytocontrolthesupplyandavailabilityofmoney, a government attempt to influence the overall level of economic activity inline with its political objectives (Clarida 1999). According to Peter (1999), monetarypolicy has no specific definition in economic fields. It define the actions design tomanipulatethemoneysupplyincludingbankcredit,inordertoachievedthespecified economic objectives by duly authorized public authority, most commonly acentral bank.Modern macroeconomics is divided into two camps which is the neo ornew-classicaland the new Keynesianisme theory. New Keynesian are different from the old. Thenew Kenynesian looking so much like old classical and it can be conclude that theterm Keynesian has out-lived its usefulness. The economist did not agree with themain goal of the monetary policy which is to attain the best performance possible. Itis because they think that the economic are always influenced by the politician.While, according to the Federal Reserve Banks, the aims of this monetary policy arethe attainment of maximum sustainable economic growth. Beside, another aim is toimprovelivingstandardandlowunemploymentandalsolowornoinflation.(Belongia,1996)There are some assumptions in the basic principles of the new monetary policy byKeynes.ThenewpolicyarenotaboutanexegesisofKeynes(1963).NewKeynesianism (NUKE) does not put in doubt that the insights of classical theory arehelpful for economic analysis. NUKE does not believe that capitalism is threatenedby oversaving and that must be hindered by deficit spending programs. Monetarypolicy is more powerful in fighting recession than fiscal policy, the policy undertakenshould not be discretionary but ruled based. Lastly, the monetary policy need toconsider that the inflation has it costs. NUKE do not believe that a monopolizedmoney economy is necessary. As Woodford (2001), it is quite possible that theinformation revolution strengthens and privatization of money supply. But, even insuchsystem,centralbankwouldplayacentralroleduehistoricalnetworkexternalities. Therefore, a privatization of money supply does not change the NUKEbasic concept of optimal monetary policy (Gordon, 1990).Inlightoftheempiricalfailure ofnew classicaleconomics togiveaplausibleexplanation for the occurring changes in output, employment and unemployment, itis hardly astonishing that the basic principles are virtually identical with the coreprinciples ofmodernmacroeconomics.Firstly,Pg.32/33
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