Monetarism

2.1 The Rational Expectations Hypothesis The rational expectations hypothesis is the hypothesis that, when forming expectations about any variable, people will make optimal use of the available information. This information includes the actual value of certain variables and, more widely, the nature or structure of the world in which people are operating. Let the value a variable ‘y’ takes in period t depend upon, or be a function f (.) of, the value of other variables, x1, x2 and x3 have taken in some previous periods. But let y also be influenced by a random event, u. So the true nature of the world is the following: yt = f (x1t-1----- x1t-n, x2t-1----- x2t-n, x3t-1----- x3t-n) + ut ------------------------------------------ ( 2.1) Here the state of the world is represented by the actual value of all the variables and the nature of the f(.) function. Assuming the nature of the function and values of all the variables in period‘t-1’then the rational forecast of yt will be: Eyt/It-1 = f (x1t-1----- x1t-n, x2t-1----- x2t-n, x3t-1----- x3t-n) + Eut/It-1--------------------------- (2.2) Where Eyt/It-1 means the expectation of yt formed on the basis of information (I) available in period t-1.The distribution of u is another element of the ‘state of the world’ which people are assumed to know. What they do not know is the actual value ‘u’ will take in period t. Usually this distribution is assumed to be normal around zero so that u has a mean of…

Thoughts on Milton Friedman’s Positive Economics A Critical Review on Monetarism Milton Friedman, “one of the most gifted economists of the 20th century” as recognized by the Encyclopedia of World Biography, is one of the most significant American economist. Born in Brooklyn, New York in 1912 Friedman was a revolutionary man with many different positions hold during his life, such as university teacher, journal writer, and research economist. He was a non-stop person who loved his career, and…

In the following there is going to be an offer of what Thatcherism is as an ideology and key concepts involved; Privatization closely linked with Individualism and Monetarism and also how Thatcher became successful as Prime Minster in the UK. Thatcherism defined as “the free/strong-state ideological stance adopted by Margaret Thatcher: the UK version of the New Right political project” by Andrew Haywood (Heywood, 2007). Thatcherism is a term that came from The Daily Telegraph, days after…

This essay is going to examine the cultural phenomenon of the closure of British mines due to the decisions made by Margaret Thatcher during her political career, resulting in a shift of resources. British mines began to rapidly close during Margaret Thatchers political career in the 1980’s. Due to Thatcher’s ideology of monetarism and neo-liberalism, there was a decline in the Marxism system of economic and political thought. Under a conservative government, the revenue and productivity numbers…

the previous federal administrations in Britain. From the profoundly right wing political schema present in the pre-war society to the strongly liberal left that came to power in parliament after the war, the federal landscape of modern Britain warped during the 1940’s. The foundation of a social welfare republic and the rise of the labour party created a nation that was not focused on old world ideals of noble cause, monetarism and subsistent privilege. In the new welfare state, the four…

Also, the technique aims at adding the job to the employees and increasing economic growth. Research shows that private and public sector has recorded high levels of Gross Domestic Product. Policies developed by current banks focus on reflecting potential paths to inflation and deleveraging attributes. In other countries, economists work towards moderating the high levels of inflation. For such continents, a good understanding of mechanisms ("Milton Friedman Supply of Money Inflation", 2017).…

social services. Some of her ideas she was known for was that she did not compromise with anyone, was in favor of getting welfare and taxes, and getting rid of inflation by cutting spending. However, she did a poor job at creating jobs for the economy. Although some of her ideas were privatization and enterprise culture. Enterprise culture refers to the social conditions necessary to promote a self-sufficient attitude and taking a financial risk. To Thatcher it also meant a hostility to…

Friedman was strongly against the concept of Keynesian Economics, brought up by Keynes, primarily discussing theories focused in the short term, especially during recessions, when the economic output is strongly influenced by aggregate demands. Friedman was more focused on the long term effects and helping the citizens of the country as much as possible. Friedman was for monetarism, stressing its importance to keep the economy going. Monetarism is the concept that the government should control…

Keynes v. Von Hayek The confrontation between John Maynard Keynes and his partner, Friedrich August von Hayek, are one of the most famous in the history of contemporary economic thought (Keynes Hayek). This feud started during the Great Depression of the 1930’s due to the causes and remedies of business cycle downturns in market economics (Keynes Hayek). John Maynard Keynes was a believer in the quantity theory of money (monetarism), and his writing topics were essentially built on the…

and bad” (Merriam-Webster, 2015). An organization, a company or a person who behaves ethically and is sensitive about social, economic, environmental and cultural issues is socially responsible.("What Is Social Responsibility? — How To Become A Social Entrepreneur) Milton Friedman states that increasing its profits is the only social responsibility of business in “The Social Responsibility of Business is to Increase its Profits”(1970). Thomas Mulligan criticizes Friedman’s paper in “A Critique…