Monetary and fiscal policy Essay, term paper, research paper:
By Stephen Simpson Demand Demand is driven by utility — the pleasure or satisfaction that a consumer obtains from consuming a good or service.
What is more relevant is the notion of marginal utility — the additional utility that comes from consuming one additional unit of a good or service.
This feeds into the law of diminishing marginal utility — at some point, marginal utility will always decrease.
For related reading, see Economic Basics: Consumers maximize their utility by consuming up to the point where the marginal utility is at zero. Consumption is a byproduct of disposable income, where disposable income equals gross income minus net taxes.
Expressed differently, disposable income is also equal to the sum of consumption and saving.
There are a variety of equations that can express individual consumption. A person's marginal propensity to consume is largely determined by income, as that marginal propensity equals the change in consumption divided by the change in disposable income.
Similarly, a person's marginal propensity to save can be measured as the change in savings divided by the change in disposable income.
At all times, then, the marginal propensity to consume and to save must equal "1.
Wealth plays a role, as higher wealth leads to more consumption. Consumer expectations also play a significant role; if consumers expect economic conditions to worsen, they will spend less and save more.
Household debt is also a factor, as debt represents future consumption brought forward into the present. Finally, taxes and transfers also impact consumption — the more people are taxed, the less they consume, while higher transfer payments from the government can increase consumption.
The total demand for goods and services within an economy is the aggregate demand. Aggregate demand often expressed as "Y" is the sum of consumer demand, investment spending, government spending and net exports. The curve of aggregate demand is downward-sloping, as demand declines as prices increase.
For related reading, see Understanding Supply-Side Economics. Demand can be influenced by a variety of factors. Some of the most significant demand factors include: This rate of increase does slow at higher levels of wealth, though, as more income is devoted to savings future consumption.
Supply The counterpart to aggregate demand is aggregate supply — the total amount of goods and services that are produced in an economy at a given price level. There are a variety of combinations of goods and services that can be produced in an economy and the production possibilities curve illustrates the maximum output that can be achieved in an economy assuming full employment and full resource utilization.
Full production is predicated on using resources in a maximally efficient way. Gain a deeper understanding of supply and demand. For more, see Economics Basics:It seems clear that the relevant numbers should be and respectively.
However, as the extract from Prof. Piketty’s spreadsheet below shows, he uses and , thereby appearing to get both numbers wrong. U.S. Aims The United States provided money, material, and operational support to the Contras.
However, the purpose of the United States’ Nicaragua policy during the early years of the Reagan administration is a matter of debate. Essay Monetary and Fiscal Policy The Monetary and Fiscal Policies, although controlled by two different organizations, are the ways that our economy is kept under control.
Both policies have their strengths and weaknesses, some situations favoring use of both policies, but most of the time, only one is necessary.
The monetary policy is the act of regulating the money supply by the Federal. Thaddeus Russell's A Renegade History of the United States is an important new book: a demonstration that rebels and renegades are society's benefactors.
In this revisionist view of American history, you see, there is "an enduring civil war" between these two factions — the "renegades" and the "moral guardians," whom he also calls the "disciplinarians.".
Money Supply M2 in the United States increased to USD Billion in July from USD Billion in June of Money Supply M2 in the United States averaged USD Billion from until , reaching an all time high of USD Billion in July of and a record low of USD Billion in January of Supply includes labor, represented by employment, and natural resources, such as oil, land, and water.
Oil prices drive 70 percent of the cost of gas. Demand, or personal consumption, drives almost 70 percent of the economy.