Page 11 - DLIS407_INFORMATION AND LITERATURE SURVEY IN SOCIAL SCIENCES

Information and Literature Survey in Social Sciences

Notes of the World". Money circulates around this model and goods, services, valubale legal documents
etc. pass in return between the 6 entities or agents that comprise the basic structure of the system.
The system flows of money, goods etc., continuously try to self-adjust, in order to attain a condition
of equilibrium.
Since at least the 1960s, macroeconomics has been characterized by further intergration as to microbased
modelling of sectors, including rationality of players, efficient use of market information, and imperfect
competition. This has addressed a long-standing concern about inconsistent development of the same
subject. Macroeconomic analysis also considers factors affecting the long-term level and growth of
national income. such factors include capital accumulation, technological change and labor force
growth.

Growth

Growth economics studies factors that explain economic growth-the increase in output per capita of
a country over a long period of time. The same factors are used to explain differences in the level of
output per capita between countries, in particular why some countries grow faster than others, and
whether countries converge at the same rates of growth. Much-studied factors include the rate of
investment population growth, and technological change. These are represented in theoretical and
empirical forms (as in the neoclassical and endogenous growth models) and in growth accounting.

Business Cycle

The economics of a depression were the spur for the creation of "macroeconomics" as a separate
discipline field of study. During the Great Depression of the 1930s, John Maynard Keynes authored
a book entitled The General Theory of Employment, Interest and money outlining the key theories
of keynesian economics . Keynes contended that aggregate demand for goods mights be insufficient
during economic downturns, leading to unnecessarily high unemployment and losses of potential
output. He therefore advocated active policy responses by the public sector, including monetary policy
actions by the central bank and fiscal policy actions by the government to stabilize output over the
business cycle. Thus, a central bank and fiscal policy action by the government to stabilize output over
the business cycle. Thus, a central conclusion of Keynesian economics is that, in some situations, no
strong automatic mechanism moves output and employment towards full employment levels. John
Hick' IS/LM model has been the most influential interpretation of The General Theory.

Over the years, the understanding of the business cycle has branched into various schools, related to or
opposed to keynesianism. The neoclassical synthesis refers to the reconciliation of keynesian economics
with neoclassical economics, stating that keynesianism is correct in the shorturn, with the economy
following neoclassical theory in the long run. The new classical school critiques the keynesian view
of the business cycle. It includes Friedman's permanent income hypothesis view on consumption, the
"rational expectations revolution" spearheaded by Robert Lucas, and real business cycle theory.

Self Assessment

State whether the following statements are True or False:
4. In macroeconomics production is the conservation of input into outputs.
5. Opportunity cost refers to the economic cost of production.
6. Macroeconomics examines the economy as a whole.

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