Keynes Theory of Income and Employment Essay Example for Free

Keynes Theory of Income and Employment Essay The term ‘classical economists’ was firstly used by Karl Marx to describe economic thought of Ricardo and his predecessors including Adam Smith. However, by ‘classical economists’, Keynes meant the followers of David Ricardo including John Stuart Mill, Alfred Marshal and Pigou. According to Keynes, the term ‘classical economics’ refers to the traditional or orthodox principles of economics, which had come to be accepted, by and large, by the well known economists by then. Being the follower of Marshal, Keynes had himself accepted and taught these classical principles. But he repudiated the doctrine of laissez-faire. The two broad features of classical theory of employment were: (a) The assumption of full employment of labour and other productive resources, and (b) The flexibility of prices and wages to bring about the full employment (a) Full employment:- According to classical economists, the labour and the other resources are always fully employed. Moreover, the general over-production and general unemployment are assumed to be impossible. If there is any unemployment in the country, it is assumed to be temporary or abnormal. According to classical views of employment, the unemployment cannot be persisted for a long time, and there is always a tendency of full employment in the country. (b) Flexibility of prices and wages:- The second assumption of full employment theory is the flexibility of prices and wages. It is the flexibility of prices and wages which automatically brings about full employment. If there is general over-production resulting in depression and unemployment, prices would fall as a result of which demand would increase, prices would rise and productive activity will be stimulated and unemployment would tend to disappear. Similarly, the unemployment could be cured by cutting down wages which would increase the demand for labour and would stimulate activity. Thus, if the prices and wages are allowed to move freely, unemployment would disappear and full employment level would be restored. Say’s Law:- 1. Say’s Law is the foundation of classical economics. Assumption of full employment as a normal condition of a free market economy is justified by classical economists by a law known as ‘Say’s Law of Markets’. 2. It was the theory on the basis of which classical economists thought that general over-production and general unemployment are not possible. . According to the French economist J. B. Say, supply creates its own demand. According to him, it is production which creates market for goods. More of production, more of creating demand for other goods. There can be no problem of over-production. 4. Say denies the possibility of the deficiency of aggregate demand. 5. The c onceived Say’s Law describes an important fact about the working of free-exchange of economy that the main source of demand is the sum of incomes earned by the various productive factors from the process of production itself. A new productive process, by paying out income to its employed factors, generates demand at the same time that it adds to supply. It is thus production which creates market for goods, or supply creates its own demand not only at the same time but also to an equal extent. 6. According to Say, the aggregate supply of commodities in the economy would be exactly equal to aggregate demand. If there is any deficiency in the demand, it would be temporary and it would be ultimately equal to aggregate supply. Therefore, the employment of more resources will always be profitable and will take to the point of full employment. 7. According to Say’s Law, there will always be a sufficient rate of total spending so as to keep all resources fully employed. Most of the income is spent on consumer goods and a par of it is saved. 8. The classical economists are of the view that all the savings are spent automatically on investment goods. Savings and investments are interchangeable words and are equal to each other. 9. Since saving is another form of spending, according to classical theory, all income is spent partly for consumption and partly for investment. 10. If there is any gap between saving and investment, the rate of interest brings about equality between the two. Basic Assumptions of Say’s Law:- (a) Perfectly competitive market and free exchange economy. (b) Free flow of money incomes. All the savings must be immediately invested and all the income must be immediately spent. (c) Savings are equal to investment and equality must bring about by flexible interest rate. (d) No intervention of government in market operations, i. e. , a laissez faire economy, and there is no government expenditure, taxation and subsidies. (e) Market size is limited by the volume of production and aggregate demand is equal to aggregate supply. (f) It is a closed economy. The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s. It was the longest, most widespread, and deepest depression of the 20th century. In the 21st century, the Great Depression is commonly used as an example of how far the worlds economy can decline. The depression originated in the U. S. , starting with the fall in stock prices that began around September 4, 1929 and became worldwide news with the stock market crash of October 29, 1929. From there, it quickly spread to almost every country in the world. The Great Depression had devastating effects in virtually every country, rich and poor. Personal income, tax revenue, profits and prices dropped. Unemployment in the U. S. rose to 25%, and in some countries rose as high as 33%. British economist John Maynard Keynes argued in General Theory of Employment Interest and Money that lower aggregate expenditures in the economy contributed to a massive decline in income and to employment that was well below the average. In such a situation, the economy reached equilibrium at low levels of economic activity and high unemployment. Keynes basic idea was simple: to keep people fully employed, governments have to run deficits when the economy is slowing, as the private sector would not invest enough to keep production at the normal level and bring the economy out of recession. Keynesian economists called on governments during times of economic crisis to pick up the slack by increasing government spending and/or cutting taxes. Criticism of Keynes on Classical Theory:- The law of J.B Say was finally falsified and laid to rest with the writings of Lord J.M. Keynes. He in his book, General Theory, has severally citicized the Say’s La on the following grounds. †¢ Posibility of defficiency of affective demand:- He says that in a compatative market it is not necessory that all income earned is automatically spend on cosumption and investment. A part of Income may be saved and may go to increase individual holdings. There may, thus appear a deficiency in aggregate demand causing overproduction and unemployment in the country. †¢ Pigou’s view on wage cuts:- Keynes criticized the view that a general cut in real wages in times of depression is a cure for unemployment. Keynes is of the view that a general cut in real wages may reduce the aggrigate demand for goods and deepen depression. †¢ Saving investment equality:- The Say’s Law assumes that micro economic analysis can profitably by by applied to the economy as a whole. Keynes rejects this view and says that for the explanation of the general theory of income and employment, the macro economic analysis is required. †¢ Saving investment equality:- Keynes was never convinced of the classical version that interest elasticity can equate savings ad investment. According to him, It is the income not the rate of interest which is the equilibrium force between saving and investment. †¢ Monopoly element:- Say’s Law assumes perfect competition in the economy. Keynes says It is the imperfect completion which in practice prevails in the product and factor market. †¢ Role of Trade unions:- In the contemporary capitalistic world, The trade unions bargain with the employers for the fixation of wages. The state also fixes minimum wages in certain industries. †¢ Short run economics:- Keynes says that, the lenth of long run is not clear in Say’s law. Keynes Theory Of Income And Employment John Maynard Keynes wrote his esteemed book â€Å"General Theory of Employment† in 1936. Keynes has strongly criticised the classical theory in his book. His theory of employment is widely accepted by modern economists. Keynesian economics is also known as ‘new economics’ and ‘economic revolution’. Definition:- â€Å"In short period, level of national income and so of employment is determined by aggregate demand and aggregate supply in the country.† â€Å"Volume of employment depends on the level of national income and output. Increase in national income means increase in employment† The equilibrium of national income occurs where aggregate demand is equal to aggregate supply. This equilibrium is also called effective demand point.

Cloning: Opening a Pandoras Box :: Genetic Engineering Essays

Cloning: Opening a Pandora's Box What Dolly is to biology can be likened to what nuclear bomb is to physics. And just like the latter, Dolly brings with it a host of controversies. Dolly redefined nature the same way Fat Man and Little Boy redefined warfare in 1945. The impact to the human civilisation is what makes both Dolly and nuclear physics so great, and controversial. It needs not take long for everyone to realise the Pandora's box that Dolly has pried open, even for someone who knows nothing about biology like myself. Suddenly, terms like clones, DNA, biotech, life sciences and genes amongst many other similar, once alien, terminologies seemed to appear everywhere; in books, magazines, newspapers and television programmes. Soon thereafter, there were protests, debates and even legislations passed to restrict scientists/biologists/geneticists in their researches. Just what are the reasons behind the world's infatuation over a sheep? Dolly would not be conceived in nature-it is man-made, it is artificial and yet, it is real. Man had just promoted himself to be Dolly's God. And being a mammal, Dolly opens up questions faster than anyone could possibly answer. The ability to create genetically identical mammals, including humans, is the crux of the controversy revolving Dolly. Like nuclear physics, Dolly is a double-edged sword. We have heard often enough the pros and cons of genetic-engineering techniques that are improved over time. But really, what are all these talks about ethics, rights and law going to amount to? The fact is that man is an inquisitive animal, an intelligent one at that. We have come to understand the change from day to night, we have sent man onto the moon, we have created enough nuclear bombs to blow up the very planet we live in 20 times over and we are inching towards unravelling and deciphering God's instructions manual in the very near future. In my humble opinion, nothing is going to stop the force of man's curious mind, not laws and definitely not ethical considerations. Already, one Italian scientist, Dr. Severino Antinori, had openly claimed that he had successfully implanted a cloned human embryo into a human surrogate mother(1) . The implications of Dolly's success are way beyond the medical realm. Commercially, Dolly sparked an explosion of new frontiers for those with an entrepreneurial mind. You want to slim down? We can take out your "fatty genes." You want to have blond hair?

Nordstrom Incâ€analyzing Financial Performance

NORDSTROM INC—ANALYZING FINANCIAL PERFORMANCE RETURN ON OPOERATING ASSETS ADDITIVE DUPONT MODEL Summary Nordstrom is one of the oldest retail companies in the United States. It started from 1901 in Seattle and has been grown to a powerful retailer in national area. Selling high quality products is the most important method for Nordstrom to collect its revenue. At the same time, Nordstrom also offers credits and debts to customers by his banks. In this case, we are trying to analysis Nordstrom’s financial statements and calculate few simple ratios to approach the performance of this company.The main point in our analysis is to figure out how Nordstrom is using its operating assets to get returning. a). ROE is used to measure the net profit in a period as a percentage of shareholder’s equity. In other word, ROE means how much net income we can get by using shareholders’ investment. ROE is more important than net income in dollar terms because ROE is a ratio. Ratio allowed analysts to compare companies’ performance over the period. In fact, the ratio can also help us compare companies in a different size or different industry.Net income in dollar terms is not widely used because this method is limited by companies’ different situations. b). ROE and RONA are both useful methods to determine a company’s performance. However, ROE and RONA measure a company’s performance in a different way. ROE considers entire company’s income, expenses and gain/loss of a company’s profit; RONA only consider a company’s net profit from operating activities. On the other hand, ROE calculates all returns which come from shareholder’s building of equity; RONA only calculates the operating assets and liabilities which don’t include the financing activities.The non-operating portion of ROE represents is that a company captures profit from financing activities and investing activities (both of them a re not operating activities). c). Marginal tax rate means a rate of tax that one company needs to pay on its next dollar of taxable income. Marginal tax rate will affect company’s future economic decisions because this tax rate is related to the economic situation. So, companies not only need to consider federal income tax but also need to consider state income tax. Tax shield is the tax reduction, which is created by items that are allowed to take deduction from tax income.For instance, interest on debt is tax-deductible, taking on debt makes tax shield. Tax shield is an important method to saving cash flow and it is a significant part of companies’ business valuation (Wikipedia, 2012). d. (in millions)| Fiscal 2009| Fiscal 2008| Fiscal 2007| Operating assets| 6,579| 5,661| 5,600| Operating liabilities| 2,394| 1,938| 1,988| Net operating assets| 4,185| 3,723| 3,612| e. 2009 NOPAT= 441 + [(138? (1- 38. 5%)] = 526 2008 NOPAT= 401 + [(131? (1-38. 5%)] =482 The dollar amo unt of Nordstrom’s tax shield from nonoperation activities in fiscal 2009 is $53 ( $ 138 x 38. 5 % ). f. 009 RNOA = $526 /[($4,185 + $3,723)/2] = $526 / $3,954 = 13. 3% 2008 RNOA = $482 /[($3,723 + $3,612)/2] = $482 / $3,668 = 13. 1% g. RNOA is improved over the two years. In order to understand the increase, we can examine NOPM and NOAT. NOPM is 6. 1 % ( $ 526 / $ 8, 627) in 2009 and 5. 6 % ( $ 482 / 8, 573) in 2008. NOPM analyzes the amount of net operating profit after tax for each dollar that is been earned by sales. The increase in NOPM may be seen a small increase but if the volume of the sales is considered, the increase would have huge impact on a increase in net income. NOAT is 2. 18 % ($ 8, 627 / 3,954) in 2009 and 2. 4 % ($ 8, 573 / 3, 688) in 2008. The decrease in NOAT shows that the company is less efficient and effective in terms of generating sales by use of assets. To conclude, it could be said that the company achieved better probability by a worse use of ope rating assets. However, the stance of the company is good and becoming better if we emphasize the increase in RNOA over the two years. h. 2009 ROE = $441 /[($1,572+ $1,210)/2] = 31. 7 % Non operating return: ROE – RNOA = 31. 7 % – 13. 3 % = 18. 4 % 2008 ROE = $401 /[($1, 210 + $ 1,115)/2] = 34. 5 % Non operating return: ROE – RNOA = 34. 5 % – 13. 1 % = 21. 4 % The ROE is decreased from 34. % to 31. 7 % over the two years. The difference between ROE and RNOA shows that there is non-operating return. Non-operating returns shows the effect of debt to finance operating assets. Moreover, it shows that Nordstrom uses liabilities or debt to increase operating assets and earnings. Nordstrom uses debt and the cost of the debt is less than the earnings, therefore it is beneficial for the company. i. Net non-operating obligations 2007: $261+ $2,236 = $2,497 2008: $275+$24+$$2,214 = $2,513 2009: $356+2,257= $2,613 FLEV 2009: [($2,613+$2,513)/2]/$1,390 = 1. 84 2008: [ $2,523+$2,497)/2]/$1,163 = 2. 15 It shows that Nordstrom has $1. 4 of non-operating liabilities for every dollar of shareholder’s equity. The company has less financial leverage compare to year 2008. Additionally, the company does not have non-operating assets; FLEV measure can be used as company’s debt-to-equity ratio too. Spread 2009: 13. 3% – ($85/$2,563) = 10. 0% 2008: 13. 1% – ($81/$2,505) = 9. 9% Nordstrom’s RNOA earned 13. 3% and 13. 1% in 2008 and 2009, while the company paying only 3. 3% and 3. 2% for its debt. Therefore, it means that the company operating return exceeds the cost of borrowing. Non-operating return 2009: 1. 84 x 10. 0% = 18. 4% 2008: 2. 15 x 9. 9% 21. 3% j. Nordstrom| TJX| Return on equity| 31. 7%| 48. 3%| RNOA| 13. 3%| 38. 3%| NOPM| 6. 1%| 6. 1%| NOAT| 2. 1%| 6. 28%| Non operating return| 18. 4%| 10. 1%| FLEV| 1. 84| 0. 29| Spread| 10. 0%| 34. 9%| The ROE of Nordstrom is 31. 7% and TJX 48. 3% show that both of the compani es are very profitable. The companies are very different than each other in terms of strategies. Nordstrom mostly uses leverage in order to increase the returns; on the other hand, TJX uses mostly stockholders equity and less leverage. Both of the companies have the same NOPM at 6. 1% that states that both companies make 6. 1 cents after tax for every dollar of sale.Furthermore, TJX has better operating asset turnover (NOAT) than Nordstrom, which shows that TJX is converting its operating assets to cash three times faster than Nordstrom. RNOA is calculated by multiplying NOAT and NOPM that is 13. 3 % for Nordstrom and 38. 4 % for TJX. The non-operating return is different for companies. The numbers are 18. 4 % for Nordstrom and 10. 1 % for TJX. The numbers show that Nordstrom has more leverage than TJX. Nordstrom’s FLEV is much higher than TJX which shows that TJX has less obligations and leverage than Nordstrom with regarding to equity. TJX’s spread is 3 times higher than Nordstrom.Although both companies have relatively close non-operating expenses to non-operating obligations number ( cost of debt ), the difference in Spread is related to RNOA numbers. Additionally, TJX does not have many obligations, which lead to low non-operating return. k. In order to improve RNOA in 2010, the company can improve its NOPM or its NOAT. Nordstrom managements have to improve their sales and reduce the expenses so as to improve NOPM. Decreasing the amount of operating assets such as long-term fixed assets can increase NOAT. Additionally, they can try some ways to collect account receivable quickly, sell inventories quickly nd sell some property or equipment. In terms of liabilities, Nordstrom managements can defer to pay bill in account payable and income tax liabilities. These methods may improve Nordstrom’s RNOA. Conclusion Nordstrom Inc. ’s RNOA ratio shows that the company’s financial performance in 2009 is slightly better than in 2008 . More specifically, the RNOA is increased from 13. 3% to 13. 1 % over the two years but its ROE is decreased. The difference between ROE and RNOA shows that there is non-operating return. Non-operating returns shows the effect of debt to finance operating assets.Moreover, it shows that Nordstrom uses liabilities or debt to increase operating assets and earnings. Nordstrom uses debt and the cost of the debt is less than the earnings, therefore it is beneficial for the company. Based on the data from balance sheet, on the other hand, the managements utilized more liabilities in 2009 than 2008 to increase the returns.. That means Nordstrom’s managers did good jobs in financial performance in 2009. However, compared with others more successful companies in the same industry, such as TJX, Nordstrom managements should try others effective methods to improve their returns.

The History of AIDS and HIV - 690 Words

In this HHMI lecture, the speaker, Dr. Ojiktu, combined basic research and clinical and public health work in her talk just as she does in her everyday work life. She is a medical doctors that sees many patients between the Boston area and a South African province in which 1 and 5 people are infected with the a virus that causes aids. She discuses the microscopic realm of the virus and virus infected cells to AIDS therapies. Dr. Ojiktu treats people with HIV and other infectious diseases. She enjoys linking what is happening here and overseas. She also works on a team to develop programs and do research concerning aids. In 1980 a strange new disease was growing, starting in Los Angeles. This disease presented vague symptoms such as weight loss, lack of energy, diarrhea, fevers and sweats, rashes, and swollen lymph nodes. These symptoms could be caused by any viral infectious. The unique thing is that these systems were chronic, progressive, and debilitating. 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