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1

Many experts believe that if wages and prices are completely flexible than any shock to the system will result in instantaneous adjustment of wages and prices to the new situation. What did the 2008 crisis prove actually happens?

When shocks to the system occur, agents do not know what will happen next. In the fact of uncertainty, they do not readjust their spending; instead they refrain from spending until the mists clear, sending the economy into a tailspin.

2

What does Keynes say the government should do when a shock hits an economy? Has his solutions been heeded?

The government needs to pump up the economy with money and to minimize the chances of serious shocks happening in the first place. So far the first one of these has happened thanks to bailouts and stimulus packages.

3

What does Keynes say the government should do when a shock hits an economy? Has his solutions been heeded?

The government needs to pump up the economy with money and to minimize the chances of serious shocks happening in the first place. So far the first one of these has happened thanks to bailouts and stimulus packages.

4

What does Skidelsky think caused the 2008 crisis?

That the root cause of the present crisis lies in the intellectual failure of economics. It was the wrong ideas of economists which legitimized the deregulation of finance, and it was the deregulation of finance which led to the credit explosion which collapsed into the credit crunch.

5

What is the cornerstone of Keyne's theory?

The inescapable uncertainty about the future.

6

Did Keynes think economics should be intuitive or counter-intuitive? Did he want simple or complex financial systems?

Intuitive, put it into a language that everyone understands. Also he wanted simple financial systems.

7

Did Keynes think economics should be intuitive or counter-intuitive? Did he want simple or complex financial systems?

Intuitive, put it into a language that everyone understands. Also he wanted simple financial systems.

8

There are a lot of misconceptions about Keynes and Keynesianism. What did Keynes actually believe about:

1. Capitalism
2. Deficits
3. Tax-and-spend policies
4. Unemployment
5. Inflation

1. He thought capitalism was the best economic system on offer but he did not praise it.
2. Keynes thought that government budgets should normally be in surplus.
3. He wondered whether a government take of more than 25% of the national income was a good thing.
4. He thought unemployment was due to inflexible wages and prices.
5. He believed in stable prices and that central governments could achieve price stability by limiting money growth. It was idiotic in his eyes to worry about inflation when prices and output were in free fall.

9

What does Keynes say the government should do when a shock hits an economy? Has his solutions been heeded?

The government needs to pump up the economy with money and to minimize the chances of serious shocks happening in the first place. So far the first one of these has happened thanks to bailouts and stimulus packages. . The second one which is understanding the causes of the instability of the financial system has not been heeded and is arguably more important.

10

There are a lot of misconceptions about Keynes and Keynesianism. What did Keynes actually believe about:

1. Capitalism
2. Deficits
3. Tax-and-spend policies
4. Unemployment
5. Inflation

1. He thought capitalism was the best economic system on offer but he did not praise it.
2. Keynes thought that government budgets should normally be in surplus.
3. He wondered whether a government take of more than 25% of the national income was a good thing.
4. He thought unemployment was due to inflexible wages and prices.
5. He believed in stable prices and that central governments could achieve price stability by limiting money growth. It was idiotic in his eyes to worry about inflation when prices and output were in free fall.

11

Did Keynes offer a depression theory or a general theory? Why?

A general theory. First, Keynes believed that deep slumps were always possible in a market system left to itself and that there was therefore a role for government in ensuring that they did not happen. Second, Keynes was a moralist. He was always questioning the morality of economics.

12

Did Keynes offer a depression theory or a general theory? Why?

A general theory. First, Keynes believed that deep slumps were always possible in a market system left to itself and that there was therefore a role for government in ensuring that they did not happen. Second, Keynes was a moralist. He was always questioning the morality of economics.

13

14

What in a nutshell is Keynesian political economy?

Unless governments took steps to stabilize market economics at full employment, the undoubted benefit of markets would be lost and political space would be opened up for extremists who would offer to solve the economic problem by abolishing markets, peace and liberty.