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Economic Category:
Macroeconomics and Monetary Economics
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1.
Aggregate Demand
Aggregate demand is the total demand for goods and services produced in the economy over a period of time. This page explains related concepts and gives a graph of the aggregate demand curve. [Details...]
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2.
Aggregate Supply
Aggregate Supply measures the volume of goods and services produced within the economy at a given overall price level. This page shows a short-run and a long-run aggregate supply curve and explains each. [Details...]
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3.
An Overview of the Great Depression
This article provides an overview of selected events and economic explanations of the interwar era. What follows is not intended to be a detailed and exhaustive review of the literature on the Great Depression, or of any one theory in particular. Rather, it will attempt to describe the "big picture" events and topics of interest. For the reader who wishes more extensive analysis and detail, references to additional materials are also included.
[Details...]
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5.
Bank Runs
A run on a bank occurs when a large number of depositors, fearing that their bank will be unable to repay their deposits in full and on time, try to withdraw their funds immediately. This article describes how the danger of bank runs has been overstated. [Details...]
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6.
Banking Panics in the US: 1873-1933
Prior to the passage of deposit insurance legislation in 1933 banking panics were a recurrent feature of U.S. banking history. Three phases of that panic experience can be identified depending upon the type of regulatory framework in place: the pre-Civil War era, the National Banking era, and the era of the Federal Reserve System. [Details...]
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7.
Banking in the Western U.S.
This article starts with the California gold rush and explains through the developments until after World War II. It discusses the failures and what has become our system today. [Details...]
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9.
Bimetallism
A bimetallic monetary standard can be defined as one in which coins of two different metals are legal tender. Such standards were commonplace in Western economies throughout most of the last millennium, although their details differed. [Details...]
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10.
Business Cycles
The United States and all other modern industrial economies experience significant swings in economic activity. The combination of booms and recessions, the ebb and flow of economic activity, is called the business cycle.
[Details...]
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11.
Capital Flight
This article explains what capital flight is and the types of it there are and who it effects. Different options are suggested to reduce capital flight or for governments to limit capital flight. [Details...]
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12.
Competing Money Supplies
What would the consequences of applying the principle of laissez-faire to money? While the idea may seem strange to most people, economists have debated the question of competing money supplies off and on since Adam Smith's time. This article examines this age old question which has come into play in the economic world of today. [Details...]
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14.
Council of Economic Advisers
"The Council of Economic Advisers was established by the Employment Act of 1946 to provide the President with objective economic analysis and advice on the development and implementation of a wide range of domestic and international economic policy issues." This article examines the history, policies and evolving role and influence of the CEA. [Details...]
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15.
Credit in the Colonial American Economy
Credit was vital to the economy of colonial America and much of the individual prosperity and success in the colonies was due to credit. This article discusses all payment options as well as the nature of the repayment of credit in order to understand the role of credit in the eighteenth century. [Details...]
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16.
Deflation
Deflation is a persistent fall in some generally followed aggregate indicator of price movements, such as the consumer price index or the GDP deflator. This article examines the historical and contemporary worries about deflation, deflation in the Great Depression Era, the debt-deflation problem, and more concerning the labor market and today. [Details...]
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17.
Deposit Insurance
This article describes both sides of the federal deposit insurance reform which has come under greater public scrutiny more recently than at any time since its enactment in 1933. [Details...]
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18.
Economic Growth
This article focuses on the concept of compounded growth in which things can multiply very quickly. Growth in Income Per Capita is explained with examples of the United States and Japan. Examples of ideas and growth are given as well. [Details...]
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19.
Federal Reserve System
The historical origins of the Federal Reserve System can be traced to chronic currency problems in the nineteenth century. In response to the Panic of 1907, Congress created the National Monetary Commission charged with the mission of reforming the currency system. It soon became clear that some type of central banking institution would emerge from the Commissions deliberations, albeit one operating within the context of a gold standard. This article focuses on the key questions: What type of central bank? Would it be a centralized one, or a populist, decentralized one?
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20.
Federal Reserve System
The Federal Reserve System (the Fed) has been the central bank of the United States since it was created in 1913. The main purpose of a central bank is to regulate the supply of money and credit to the economy. This article focuses on the board of governors, the Fed's principal policy-making organization, as playing a key role in this process.
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21.
Forecasting and Econometric Models
An econometric model is one of the tools that economists use to forecast future developments in the economy. In the simplest terms, econometricians measure past relationships between variables such as consumer spending and gross national product, and then try to forecast how changes in some variables will affect the future course of others.
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22.
German Economic "Miracle"
After World War II the German economy lay in shambles. This article describes the economic condition before and during the war and how only ten years after the war people began talking about the German economic miracle. [Details...]
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23.
Gold Standard
The periods in which the gold standard flourished, the groupings of countries under the gold standard, and the dates during which individual countries adhered to this standard are delineated in the first section. Then characteristics of the gold standard, and implications for the money supply of a country on the standard are outlined. [Details...]
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24.
Gold Standard
The gold standard was a commitment by participating countries to fix the prices of their domestic currencies in terms of a specified amount of gold. This article explains the history of the Gold Standard and how it worked. [Details...]
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25.
Great Depression
This article describes the Great Depression in depth as the most important economic event in American history. It caused enormous hardship for tens of millions of people and the failure of a large fraction of the nation's banks, businesses, and farms. [Details...]
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26.
Gresham's Law
This article compares some modern interpretations of Gresham's Law and regards some as legitimate and others as entirely unwarranted. [Details...]
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27.
Gross Domestic Product
This article defines GDP and shows how to calculate GDP as well as Real GDP and GNP. It tells about the differences between GDP and GNP. [Details...]
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28.
Gross Domestic Product
Gross domestic product, the official measure of total output of goods and services in the U.S. economy, represents the capstone and grand summary of the world's best system of economic statistics. [Details...]
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29.
Historical Political Business Cycles in the United States
The notion that incumbents will alter the economic environment for their short-term political gain at the expense of long-term economic stability is referred to as generating a political business cycle. This article details the history of this notion by using past president's policies as examples. [Details...]
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32.
Investment
This article explains what investment is, how it is volatile, and that it contributes to economic growth, roughly for one-sixth of the gross national product. [Details...]
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33.
Ireland's Great Famine
This article describes the Great Irish Famine from 1846-1852 by explaining its causes, the direct effects of the famine, and the post-famine adjustment. [Details...]
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34.
Keynesian Growth: the Cambridge version
The heroic entrepreneurs of Schumpeter are resurrected, only slightly less heroically, in The General Theory (1936) of J.M. Keynes. Investment, in the Keynesian system, is an independent affair contingent upon finance and the "animal spirits" of entrepreneurs. The issue is that Keynes did not extend his theory of demand-determined equilibrium into a theory of growth. This was left for the Cambridge Keynesians to explore. The first to come up with an extension was Sir Roy F. Harrod who (concurrently with Evsey Domar) introduced the "Harrod-Domar" Model of growth (Harrod in 1939, Domar in 1946).
[Details...]
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35.
Monetary Policy
This article dicusses the common goals, priorities, strategies, mechanics, tactics, and targets of monetary policy. [Details...]
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36.
Monetary Unions
This article defines monetary unions, discusses its advantages and disadvantages, explains its history in the nineteenth century, and gives examples of success stories. [Details...]
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37.
Money Supply
An encyclopedia entry describing money supply which involves currencies and description of the Federal Reserve Policy. [Details...]
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40.
Morris Plan Banks
This article explains how Morris Plan banks were at the forefront of an explosion of consumer credit that started at the beginning of the second decade of the twentieth century and how they became the prominent institution for providing consumer credit to the poor through the 1920s. [Details...]
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42.
Phillips Curve
The Phillips curve represents the relationship between the rate of inflation and the unemployment rate. This article describes A.W.H. Phillip's discovery that there was a consistent inverse, or negative, relationship between the rate of wage inflation and the rate of unemployment in the United Kingdom from 1861 to 1957. [Details...]
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43.
Productivity
This article describes the aspects of productivity with regard to the United States. It describes lagging investment, innovation, and skills when discussing productivity. [Details...]
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44.
Recessions
This article explains the problems with the definition of recessions and displays a table with the brief history of the Three Ds of Recession. [Details...]
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45.
Reconstruction Finance Corporation
This article explains the history of the Reconstruction Finance Corporation, how it operated during the Hoover administration and during the New Deal, as well as WWII and the final years until 1953. [Details...]
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46.
Saving
To economists, saving means consuming less in the present in order to consume more in the future. This article discusses motives for saving, economic growth and demographic change, labor-supply decisions, economic policy, alternative explanations of the recent decline in U.S. saving, and the implications of low saving for baby boomers. [Details...]
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47.
Savings and Loan Crisis
This article discusses the savings and loan crisis by explaining public policy causes with roots before 1980, public policy causes that began in the eighties, what things did not cause the savings and loan disaster, and the future of savings and loans. [Details...]
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48.
The Business Cycle
Defines the concept of the business cycle, how it is tracked, some significant expansions and contractions in history, and the debate over whether the business cycle has diminished in recent years. [Details...]
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49.
The Depression of 1893
This article describes economic developments in the decades leading up to the depression; the performance of the economy during the 1890's; domestic and international causes of depression; and political and social responses to the depression. [Details...]
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50.
The Economics of the Civil War
This article focuses on the economic causes of the Civil war, the costs of the war, the problem of financing the war, and a re-examination of the Hacker-Beard thesis that the war was a turning point in American economic history. [Details...]
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53.
The National Recovery Administration
This article outlines the history of the National Recovery Administration, one of the most important and controversial agencies in Roosevelt's New Deal. It discusses the agency's "codes of fair competition" under which antitrust law exemptions could be granted in exchange for adoption of minimum wages, problems some industries encountered in their subsequent attempts to fix prices under the codes, and the macroeconomic effects of the program.
[Details...]
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54.
The Panic of 1907
The Panic of 1907 was the last and most severe of the bank panics that plagued the National Banking Era of the United States. This article discusses what caused the panic, the panic at the trust companies, the connection to the stock market, and why there were runs on the trust companies. [Details...]
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57.
US Banking History, Civil War to World War II
This article describes how the National Banking era was ushered in by the passage of the National Currency (later renamed the National Banking) Acts of 1863 and 1864. The Acts marked a decisive change in the monetary system, confirmed a quarter-century-old trend in bank chartering arrangements, and also played a role in financing the Civil War.
[Details...]
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58.
Unemployment Rate
Definition of the unemployment rate, the natural rate of unemployment, and limitations of the employment rate measurement. [Details...]
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59.
Usury
The question of when and if money can be lent at interest for a guaranteed return is one of the oldest moral and economic problems in Western Civilization. This article describes how by the early modern period the concept of usury began to be secularized, but the issue of what usury is and when it occurs is still causing disputes in modern legal and theological systems.
[Details...]
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60.
http://www.economics.unimelb.edu.au/rdixon/wlaw.html
This document deals with the following topics: the relevance of Walras Law for macroeconomic (and especially unemployment) theory; who was Walras?; an intuitive (and a formal) proof of Walras Law; Walras Law and disequilibrium states; Walras versus Keynes: Notional c.f. Effective Demands.
[Details...]
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61.
American Currency Exhibit
This tutorial contains many images of American currency, going as far back as 1776. Eras represented by these images include: Independence; Westward Expansion; Civil War; Industrial Revolution; Metal Standards; National Stability; and World Standard. [Details...]
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62.
Arbitrage Model
The direction of trade is crucial in currency arbitrage. Use this page to enter some exchange rates below and see a graph of the TPF for the dollar and the pound with arbitrage profit as demonstrated from the slopes of the TPF.
[Details...]
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67.
IS-LM Model
The IS-LM model depicts the causes and consequences of simultaneous equilibria within the product market and the money market. A graphical system visually demonstrates how an equilibrium level of income established in the product market interacts with the equilibrium rate of interest determined in the money market. [Details...]
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68.
Macro-Equilibrium
Equilibrium in the goods market may be graphically depicted using a simple macro-model of the relationship between income(Y) and aggregate expenditure(AE), where AE appears on the vertical axis and Y is on the horizontal axis. Equilibrium is depicted as the point where aggregate expenditues (AE) equal income (Y) or, where the AE function crosses the 45-degree line. [Details...]
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70.
Market Shocks
An interactive discussion on the market adjustment process in the presence of demand and supply shocks. [Details...]
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71.
Money Market
The equilibrium in the money market reflects the simultaneous interaction of the supply of and, the demand for, money. In this model, the supply of money is set by the FED and, the demand for money comprises both the speculative and transactions demand for money. [Details...]
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72.
Simple Macro Model
The parameters here provide a large number of possible solutions to the model and demonstrate important aspects of the macro theory. Select a set of parameters for the baseline and, then change some of the assumptions to examine the impacts of an alternative scenario. [Details...]
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73.
The Story of Money
A tutorial with many pictures of money in its various forms over time. Sections include: Barter; Common products as money; Value in use, value in exchange; Money simplifies trade; Money takes many shapes; Early coins; Paper money; Banking evolves; Commerce in the colonies; Early American money; After the Revolution; U.S. banks and money; The Civil War era; Progress and problems; The Fed and afterwards; Price stability: Goal of the Fed
[Details...]
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74.
Economic Growth in East Asia
Over the past three decades remarkable economic growth has occured in East Asia. This policy forum will examine key features of economic growth in eight East Asian economies: Japan, Singapore, Hong Kong, the Republic of Korea, Taiwan/China, Malaysia, Thailand, and Indonesia. This forum will also focus on some central ideas of growth theory. Tools and concepts from growth theory provide important insights into the East Asian experience. This experience, in turn, also provides new insights into the process of economic growth. One goal of this forum is to confront growth theory with an important example of economic growth, and in doing so promote understanding of both growth theory and an outstanding growth experience. [Details...]
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75.
Enterprise Restructuring in the former Soviet Union
Citizens of the countries of the former Soviet Union (FSU) have recognized the potential benefits, observed in many different cultures and societies around the world, of private, market-driven enterprises. For more than half a century enterprises in the FSU have been subject to comprehensive state ownership and central planning. Prices and financing were typically of little concern to enterprise management, while workers did not have to worry about job security and received a wide range of social benefits through enterprises. While moving toward private, market-driven enterprises offers great promise for an improved standard of living for the average person, such a transition represents a fundamental social, psychological, and economic challenge. [Details...]
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76.
History of Money - from Ancient Times to the Present Day
Monetary history in context from the dawn of civilization to the beginning of the twenty first century, based on the definitive book on the subject. This site contains a chronology, by Glyn and Roy Davies and a collection of essays written by Roy Davies on various themes using information based on the book. [Details...]
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78.
Unemployment in Eastern and Central Europe
Unemployment, once unknown and illegal in the formerly communist regimes in eastern and central Europe, has become a significant social and economic phenomenon. The rise in unemployment rates has been large but varied across countries. The transition from centrally planned economies to market-oriented economies has produced significant reductions in employment in the state sector as consumer-driven incentives begin to influence industrial structure. Reductions in employment in the state sector were partially offset by reductions in labor force particpation. Differences in the decline in labor force participation among countries led to significant differences in the relationship between unemployment growth and contraction in employment. However, the decline in labor force participation seems to be concentrated in the early stages of the transition, and in the future declining labor force participation is not likely to play as significant a role in dampening the growth of unemployment. [Details...]
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79.
Business Cycle Theory
A collection of articles providing a comprehensive coverage of the business cycle theory. The topics covered are Cycles: Some Empirical Issues, Climate Theories of the Cycle, Over-Investment Theories: the Continental tradition, Psychological and Lead/Lag Theories: the Anglo-American tradition, Monetary Theories of the Cycle, Underconsumption Theories, and Shock-Based Theories of the Cycle.
[Details...]
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81.
A Keynesian Beauty Contest in the Classroom
Most models of economic behavior are based on the assumption of rationality of economic agents and common knowledge of rationality. This means that an agent selects a strategy that maximizes his utility believing that all others do the same (are equally rational) and that all agents believe that all others believe that all agents are rational etc.
The p-beauty contest game is an appropriate game to test the assumption of this kind of reasoning. In this game a player has to guess what the average choice is going to be and the player will win if his choice is closest to some fraction of the average choice.
This experiment can be introduced in many different courses and at all levels of teaching. For example, it can be used in game theory in order to discuss the problems of iterated elimination of (weakly) dominated strategies and the issue of common knowledge of rationality; in macroeconomics to discuss rational expectations; and in microeconomics to discuss strategic interaction between players. [Details...]
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82.
A Savings/Consumption Game For Introductory Macroeconomics
Earlier this year, I took a first step at building a compendium of non-computerized classroom games for college-level economics classes (Brauer, 1994). I discovered that there are a fair number of games/exercises/simulations available to cover almost al l fundamental concepts of microeconomics, but there is a dearth of games for the macroeconomics class.
Here, then, is a game/simulation that can be played early on in a course on introductory macroeconomics. (I presume that it can be speeded up and 'juiced up' at the intermediate or MBA-introductory levels.) Most, perhaps all, textbooks and instructors, on the laborious way toward deriving an aggregate demand curve first derive an aggregate expenditure curve. The aggregate expenditure curve is usually built from an examination of the consumption function of private households, before an investment funct ion and then governmental expenditures and net exports are added. [Details...]
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83.
A Search-Theoretic Classroom Experiment with Money
This classroom experiment promotes discussion of the social origins and characteristics of money. Students take the roles of traders who face a double coincidence of wants problem. As they recognize the benefits of overcoming trading frictions, students spontaneously begin using a consumption good as a medium of exchange. The setting comes from Duffy and Och's (1999) experimental version of the Kiyotaki-Wright (1989) search model of money. In the Kiyotaki-Wright (KW) environment, agents specialize in production, but consume a good other than their own product. Specialization combined with decentralized trading introduces the double coincidence of wants problem. In fact, no one could trade if each person held out for his consumption good. For trade to occur, at least some people must be willing to accept a good which they do not intend to consume, but which they hope to trade later for their consumption good. In other words, some people must be willing to accept a medium of exchange. When there exists an item generally accepted as a medium of exchange, then that item is money. Thus the KW setting captures money in its essential role as a medium of exchange. Here, using a medium of exchange reduces the cost of searching for a trading partner who has what you want and wants what you have. [Details...]
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84.
An Aggregate Demand Driven Macroeconomic Equilibrium Experiment
This paper describes a macroeconomic experiment that can be used in the classroom to simulate the impact of consumer spending decisions on a two sector economy. In this simplified specification, low levels of spending result in an unemployment problem whereas high levels of spending cause inflation. Several incentive systems are included to influence the students' behavior. The discussion of the experiment is followed by a summary of the results and some suggested modifications. [Details...]
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85.
Beans as a Medium of Exchange
The experiment is designed to simulate an environment where something that is very similar to fiat money (i.e., is homogeneous, durable, portable, storable, divisible, has no intrinsic value of its own, etc.) will be accepted in market transactions and thus will have a "value." [Details...]
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86.
Bond Markets in Money and Banking
Students have expressed their enthusiasm for two bond market experiments that are now a regular part of my Money and Banking classes. These experiments are not designed for the principles level, but rather for upper division finance and economics majors. [Details...]
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87.
International Trade and Money: A Simple Classroom Demonstration
The activity presented in this paper is designed to demonstrate both gains from trade and the importance of fiat money as a medium of exchange. While this is certainly not the first activity to demonstrate either concept, it does offer the instructor the opportunity to prepare one demonstration for the presentation of multiple topics. This demonstration can be used in both a principles of macroeconomics or microeconomics classroom. It also can be tailored in several ways to reduce the amount of time required or to emphasize a particular topic. Student learning is enhanced as students typically find this activity humorous, adding to their excitement and interest in the topic. [Details...]
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88.
The Lucas Island Experiment
This experiment demonstrates the effects on real aggregate output of anticipated versus unanticipated monetary policy. The experiment follows Lucas's (1972) description of unanticipated monetary disturbances leading to confusion about real values and hence to fluctuations in output. See Sargent (1996) for a description of the precursors to Lucas's idea, and of its legacy. In this experiment, students gradually learn how to anticipate monetary policy, based on past Federal Reserve behavior, and therefore render monetary policy ineffective. [Details...]
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89.
The Savings/Consumption Game: An Update
A few years ago, I published a piece in this journal, entitled "A Savings/ Consumption Game for Introductory Macro-economics" (Brauer, 1994). Following a survey of available classroom games and participatory exercises, I found that most such games address issues of micro-economics, and I therefore set out to design an exercise of potential use in the teaching of introductory macroeconomics. The idea of the exercise is straightforward. Instead of merely presenting to students the graphical representation of the theoretical concept of a consumption function (C = a + bY, where C is consumption and Y is national income), why not simply collect data from the students themselves about how their own consumption (and savings) behavior might be affected if their own income were to change. [Details...]
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