A supply shock is an event that increases or decreases the supply of a commodity or service, or of commodities and services in general. This sudden change affects the equilibrium price of the good or service or the economy's general price level. In the short run, an economy-wide negative supply shock will shift the aggregate supply curve leftward, decreasing the output and increasing the price level. For example, the imposition of an embargo on trade in oil would cause an adverse supply shock, since oil is a key factor of production for a wide variety of goods. A supply shock can cause stagflation due to a combination of falling output. In the short run, an economy-wide positive supply shock will shift the aggregate supply curve rightward, increasing output and decreasing the price level. A positive supply shock could be an advance in technology which makes production more efficient, thus increasing output; the diagram to the right demonstrates a negative supply shock. When there is a supply shock, this has an adverse effect on aggregate supply: the supply curve shifts left, while the demand curve stays in the same position.
The intersection of the supply and demand curves has now moved and the equilibrium is now point B. The slope of the demand curve determines how much the price level and output respond to the shock, with more inelastic demand causing there to be a larger effect on the price level and a smaller effect on quantity. Shock Commodity price shock Demand shockMacroeconomics Stagflation Supply and demand Czech, Supply Shock: Economic Growth at the Crossroads and the Steady State Solution
A thesis or dissertation is a document submitted in support of candidature for an academic degree or professional qualification presenting the author's research and findings. In some contexts, the word "thesis" or a cognate is used for part of a bachelor's or master's course, while "dissertation" is applied to a doctorate, while in other contexts, the reverse is true; the term graduate thesis is sometimes used to refer to both master's theses and doctoral dissertations. The required complexity or quality of research of a thesis or dissertation can vary by country, university, or program, the required minimum study period may thus vary in duration; the word "dissertation" can at times be used to describe a treatise without relation to obtaining an academic degree. The term "thesis" is used to refer to the general claim of an essay or similar work; the term "thesis" comes from the Greek θέσις, meaning "something put forth", refers to an intellectual proposition. "Dissertation" comes from the Latin dissertātiō, meaning "discussion".
Aristotle was the first philosopher to define the term thesis. "A'thesis' is a supposition of some eminent philosopher that conflicts with the general opinion...for to take notice when any ordinary person expresses views contrary to men's usual opinions would be silly". For Aristotle, a thesis would therefore be a supposition, stated in contradiction with general opinion or express disagreement with other philosophers. A supposition is a statement or opinion that may or may not be true depending on the evidence and/or proof, offered; the purpose of the dissertation is thus to outline the proofs of why the author disagrees with other philosophers or the general opinion. A thesis may be arranged as a thesis by publication or a monograph, with or without appended papers though many graduate programs allow candidates to submit a curated collection of published papers. An ordinary monograph has a title page, an abstract, a table of contents, comprising the various chapters, a bibliography or a references section.
They differ in their structure in accordance with the many different areas of study and the differences between them. In a thesis by publication, the chapters constitute an introductory and comprehensive review of the appended published and unpublished article documents. Dissertations report on a research project or study, or an extended analysis of a topic; the structure of a thesis or dissertation explains the purpose, the previous research literature impinging on the topic of the study, the methods used, the findings of the project. Most world universities use a multiple chapter format: a) an introduction, which introduces the research topic, the methodology, as well as its scope and significance. Degree-awarding institutions define their own house style that candidates have to follow when preparing a thesis document. In addition to institution-specific house styles, there exist a number of field-specific and international standards and recommendations for the presentation of theses, for instance ISO 7144.
Other applicable international standards include ISO 2145 on section numbers, ISO 690 on bibliographic references, ISO 31 on quantities or units. Some older house styles specify that front matter must use a separate page number sequence from the main text, using Roman numerals; the relevant international standard and many newer style guides recognize that this book design practice can cause confusion where electronic document viewers number all pages of a document continuously from the first page, independent of any printed page numbers. They, avoid the traditional separate number sequence for front matter and require a single sequence of Arabic numerals starting with 1 for the first printed page. Presentation requirements, including pagination, layout and color of paper, use of acid-free paper, paper size, order of components, citation style, will be checked page by page by the accepting officer before the thesis is accepted and a receipt is issued. However, strict standards are not always required.
Most Italian universities, for example, have only general requirements on the character size and the page formatting, leave much freedom for the actual typographic details. A thesis or dissertation committee is a committee. In the US, these committees consist of a primary supervisor or advisor and two or more committee members, who supervise the progress of the dissertation and may act as the examining committee, or jury, at the oral examination of the thesis. At most universities, the committee is chosen by the student in conjunction with his or her primary adviser after completion of the comprehensive examinations or prospectus meeting, may consist of members of the comps committee; the committee members are doctors in their field (whether a PhD or other des
A central bank, reserve bank, or monetary authority is the institution that manages the currency, money supply, interest rates of a state or formal monetary union, oversees their commercial banking system. In contrast to a commercial bank, a central bank possesses a monopoly on increasing the monetary base in the state, generally controls the printing/coining of the national currency, which serves as the state's legal tender. A central bank acts as a lender of last resort to the banking sector during times of financial crisis. Most central banks have supervisory and regulatory powers to ensure the solvency of member institutions, to prevent bank runs, to discourage reckless or fraudulent behavior by member banks. Central banks in most developed nations are institutionally independent from political interference. Still, limited control by the executive and legislative bodies exists. Functions of a central bank may include: implementing monetary policies. Setting the official interest rate – used to manage both inflation and the country's exchange rate – and ensuring that this rate takes effect via a variety of policy mechanisms controlling the nation's entire money supply the Government's banker and the bankers' bank managing the country's foreign exchange and gold reserves and the Government bonds regulating and supervising the banking industry Central banks implement a country's chosen monetary policy.
At the most basic level, monetary policy involves establishing what form of currency the country may have, whether a fiat currency, gold-backed currency, currency board or a currency union. When a country has its own national currency, this involves the issue of some form of standardized currency, a form of promissory note: a promise to exchange the note for "money" under certain circumstances; this was a promise to exchange the money for precious metals in some fixed amount. Now, when many currencies are fiat money, the "promise to pay" consists of the promise to accept that currency to pay for taxes. A central bank may use another country's currency either directly in a currency union, or indirectly on a currency board. In the latter case, exemplified by the Bulgarian National Bank, Hong Kong and Latvia, the local currency is backed at a fixed rate by the central bank's holdings of a foreign currency. Similar to commercial banks, central banks incur liabilities. Central banks create money by issuing interest-free currency notes and selling them to the public in exchange for interest-bearing assets such as government bonds.
When a central bank wishes to purchase more bonds than their respective national governments make available, they may purchase private bonds or assets denominated in foreign currencies. The European Central Bank remits its interest income to the central banks of the member countries of the European Union; the US Federal Reserve remits all its profits to the U. S. Treasury; this income, derived from the power to issue currency, is referred to as seigniorage, belongs to the national government. The state-sanctioned power to create currency is called the Right of Issuance. Throughout history there have been disagreements over this power, since whoever controls the creation of currency controls the seigniorage income; the expression "monetary policy" may refer more narrowly to the interest-rate targets and other active measures undertaken by the monetary authority. Frictional unemployment is the time period between jobs when a worker is searching for, or transitioning from one job to another. Unemployment beyond frictional unemployment is classified as unintended unemployment.
For example, structural unemployment is a form of unemployment resulting from a mismatch between demand in the labour market and the skills and locations of the workers seeking employment. Macroeconomic policy aims to reduce unintended unemployment. Keynes labeled any jobs that would be created by a rise in wage-goods as involuntary unemployment: Men are involuntarily unemployed if, in the event of a small rise in the price of wage-goods to the money-wage, both the aggregate supply of labour willing to work for the current money-wage and the aggregate demand for it at that wage would be greater than the existing volume of employment.—John Maynard Keynes, The General Theory of Employment and Money p11 Inflation is defined either as the devaluation of a currency or equivalently the rise of prices relative to a currency. Since inflation lowers real wages, Keynesians view inflation as the solution to involuntary unemployment. However, "unanticipated" inflation leads to lender losses as the real interest rate will be lower than expected.
Thus, Keynesian monetary policy aims for a steady rate of inflation. A publication from the Austrian School, The Case Against the Fed, argues that the efforts of the central banks to control inflation have been counterproductive. Economic growth can be enhanced by investment such as more or better machinery. A low interest rate implies that firms can borrow money to invest in their capital stock and pay less interest for it. Lowering the interest is therefore considered to encourage economic growth and is used to alleviate times of low economic growth. On the other hand, raising the interest rate is used in times of high economic growth as a contra-cyclical device to keep the economy from overheating and avoid market bubbles. Further goals of monetary policy are stability of interest rates, of the financial market, of the foreign exchange market. Goals cannot be separated fr
The business cycle known as the economic cycle or trade cycle, is the downward and upward movement of gross domestic product around its long-term growth trend. The length of a business cycle is the period of time containing a single boom and contraction in sequence; these fluctuations involve shifts over time between periods of rapid economic growth and periods of relative stagnation or decline. Business cycles are measured by considering the growth rate of real gross domestic product. Despite the often-applied term cycles, these fluctuations in economic activity do not exhibit uniform or predictable periodicity; the common or popular usage boom-and-bust cycle refers to fluctuations in which the expansion is rapid and the contraction severe. The first systematic exposition of economic crises, in opposition to the existing theory of economic equilibrium, was the 1819 Nouveaux Principes d'économie politique by Jean Charles Léonard de Sismondi. Prior to that point classical economics had either denied the existence of business cycles, blamed them on external factors, notably war, or only studied the long term.
Sismondi found vindication in the Panic of 1825, the first unarguably international economic crisis, occurring in peacetime. Sismondi and his contemporary Robert Owen, who expressed similar but less systematic thoughts in 1817 Report to the Committee of the Association for the Relief of the Manufacturing Poor, both identified the cause of economic cycles as overproduction and underconsumption, caused in particular by wealth inequality, they advocated government intervention and socialism as the solution. This work did not generate interest among classical economists, though underconsumption theory developed as a heterodox branch in economics until being systematized in Keynesian economics in the 1930s. Sismondi's theory of periodic crises was developed into a theory of alternating cycles by Charles Dunoyer, similar theories, showing signs of influence by Sismondi, were developed by Johann Karl Rodbertus. Periodic crises in capitalism formed the basis of the theory of Karl Marx, who further claimed that these crises were increasing in severity and, on the basis of which, he predicted a communist revolution.
Though only passing references in Das Kapital refer to crises, they were extensively discussed in Marx's posthumously published books in Theories of Surplus Value. In Progress and Poverty, Henry George focused on land's role in crises – land speculation – and proposed a single tax on land as a solution. In 1860 French economist Clément Juglar first identified economic cycles 7 to 11 years long, although he cautiously did not claim any rigid regularity. Economist Joseph Schumpeter argued that a Juglar cycle has four stages: Expansion Crisis Recession Recovery Schumpeter's Juglar model associates recovery and prosperity with increases in productivity, consumer confidence, aggregate demand, prices. In the 20th century and others proposed a typology of business cycles according to their periodicity, so that a number of particular cycles were named after their discoverers or proposers: The Kitchin inventory cycle of 3 to 5 years The Juglar fixed-investment cycle of 7 to 11 years (often identified as "the" business cycle The Kuznets infrastructural investment cycle of 15 to 25 years (after Simon Kuznets – called "building cycle" The Kondratiev wave or long technological cycle of 45 to 60 years Some say interest in the different typologies of cycles has waned since the development of modern macroeconomics, which gives little support to the idea of regular periodic cycles.
Others realize. Since 1960, World GDP has increased by fifty-nine times, these multiples have not kept up with annual inflation over the same period. Social Contract collapses for nations when incomes are not kept in balance with cost-of-living over the timeline of the monetary system cycle - until hardships/populism/revolution are always seen in late capitalism; the Bible and Hammurabi's Code both explain economic remediations for cyclic sixty-year recurring great depressions, via fiftieth-year Jubilee debt and wealth resets. Thirty major debt forgiveness events are recorded in history including the debt forgiveness given to most european nations in the 1930s to 1954. There were great increases in productivity, industrial production and real per capita product throughout the period from 1870 to 1890 that included the Long Depression and two other recessions. There were significant increases in productivity in the years leading up to the Great Depression. Both the Long and Great Depressions were characterized by market saturation.
Over the period since the Industrial Revolution, technological progress has had a much larger effect on the economy than any fluctuations in credit or debt, the primary exception being the Great Depression, which caused a multi-year steep economic decline. The effect of technological progress can be seen by the purchasing power of an average hour's work, which has grown from $3 in 1900 to $22 in 1990, measured in 2010 dollars. There were similar increases in real wages during the 19th century. A table of innovations and long
In economics, inflation is a sustained increase in the general price level of goods and services in an economy over a period of time. When the general price level rises, each unit of currency buys services; the measure of inflation is the inflation rate, the annualized percentage change in a general price index the consumer price index, over time. The opposite of inflation is deflation. Inflation affects economies in various negative ways; the negative effects of inflation include an increase in the opportunity cost of holding money, uncertainty over future inflation which may discourage investment and savings, if inflation were rapid enough, shortages of goods as consumers begin hoarding out of concern that prices will increase in the future. Positive effects include reducing unemployment due to nominal wage rigidity, allowing the central bank more leeway in carrying out monetary policy, encouraging loans and investment instead of money hoarding, avoiding the inefficiencies associated with deflation.
Economists believe that the high rates of inflation and hyperinflation are caused by an excessive growth of the money supply. Views on which factors determine low to moderate rates of inflation are more varied. Low or moderate inflation may be attributed to fluctuations in real demand for goods and services, or changes in available supplies such as during scarcities. However, the consensus view is that a long sustained period of inflation is caused by money supply growing faster than the rate of economic growth. Today, most economists favor a steady rate of inflation. Low inflation reduces the severity of economic recessions by enabling the labor market to adjust more in a downturn, reduces the risk that a liquidity trap prevents monetary policy from stabilizing the economy; the task of keeping the rate of inflation low and stable is given to monetary authorities. These monetary authorities are the central banks that control monetary policy through the setting of interest rates, through open market operations, through the setting of banking reserve requirements.
Rapid increases in the quantity of money or in the overall money supply have occurred in many different societies throughout history, changing with different forms of money used. For instance, when gold was used as currency, the government could collect gold coins, melt them down, mix them with other metals such as silver, copper, or lead, reissue them at the same nominal value. By diluting the gold with other metals, the government could issue more coins without increasing the amount of gold used to make them; when the cost of each coin is lowered in this way, the government profits from an increase in seigniorage. This practice would increase the money supply but at the same time the relative value of each coin would be lowered; as the relative value of the coins becomes lower, consumers would need to give more coins in exchange for the same goods and services as before. These goods and services would experience a price increase. Song Dynasty China introduced the practice of printing paper money to create fiat currency.
During the Mongol Yuan Dynasty, the government spent a great deal of money fighting costly wars, reacted by printing more money, leading to inflation. Fearing the inflation that plagued the Yuan dynasty, the Ming Dynasty rejected the use of paper money, reverted to using copper coins. Large infusions of gold or silver into an economy led to inflation. From the second half of the 15th century to the first half of the 17th, Western Europe experienced a major inflationary cycle referred to as the "price revolution", with prices on average rising sixfold over 150 years; this was caused by the sudden influx of gold and silver from the New World into Habsburg Spain. The silver spread throughout a cash-starved Europe and caused widespread inflation. Demographic factors contributed to upward pressure on prices, with European population growth after depopulation caused by the Black Death pandemic. By the nineteenth century, economists categorized three separate factors that cause a rise or fall in the price of goods: a change in the value or production costs of the good, a change in the price of money, a fluctuation in the commodity price of the metallic content in the currency, currency depreciation resulting from an increased supply of currency relative to the quantity of redeemable metal backing the currency.
Following the proliferation of private banknote currency printed during the American Civil War, the term "inflation" started to appear as a direct reference to the currency depreciation that occurred as the quantity of redeemable banknotes outstripped the quantity of metal available for their redemption. At that time, the term inflation referred to the devaluation of the currency, not to a rise in the price of goods; this relationship between the over-supply of banknotes and a resulting depreciation in their value was noted by earlier classical economists such as David Hume and David Ricardo, who would go on to examine and debate what effect a currency devaluation has on the price of goods. The adoption of fiat currency by many countries, from the 18th century onwards, made much larger variations in the supply of money possible. Rapid increases in the money supply have taken place a number of times in countries experiencing political crises, produ
A financial crisis is any of a broad variety of situations in which some financial assets lose a large part of their nominal value. In the 19th and early 20th centuries, many financial crises were associated with banking panics, many recessions coincided with these panics. Other situations that are called financial crises include stock market crashes and the bursting of other financial bubbles, currency crises, sovereign defaults. Financial crises directly result in a loss of paper wealth but do not result in significant changes in the real economy. Many economists have offered theories about how financial crises develop and how they could be prevented. There is no consensus and financial crises continue to occur from time to time; when a bank suffers a sudden rush of withdrawals by depositors, this is called a bank run. Since banks lend out most of the cash they receive in deposits, it is difficult for them to pay back all deposits if these are demanded, so a run renders the bank insolvent, causing customers to lose their deposits, to the extent that they are not covered by deposit insurance.
An event in which bank runs are widespread is called a systemic banking banking panic. Examples of bank runs include the run on the Bank of the United States in 1931 and the run on Northern Rock in 2007. Banking crises occur after periods of risky lending and resulting loan defaults. A currency crisis called a devaluation crisis, is considered as part of a financial crisis. Kaminsky et al. for instance, define currency crises as occurring when a weighted average of monthly percentage depreciations in the exchange rate and monthly percentage declines in exchange reserves exceeds its mean by more than three standard deviations. Frankel and Rose define a currency crisis as a nominal depreciation of a currency of at least 25% but it is defined as at least a 10% increase in the rate of depreciation. In general, a currency crisis can be defined as a situation when the participants in an exchange market come to recognize that a pegged exchange rate is about to fail, causing speculation against the peg that hastens the failure and forces a devaluation.
A speculative bubble exists in the event of sustained overpricing of some class of assets. One factor that contributes to a bubble is the presence of buyers who purchase an asset based on the expectation that they can resell it at a higher price, rather than calculating the income it will generate in the future. If there is a bubble, there is a risk of a crash in asset prices: market participants will go on buying only as long as they expect others to buy, when many decide to sell the price will fall. However, it is difficult to predict whether an asset's price equals its fundamental value, so it is hard to detect bubbles reliably; some economists insist that bubbles never or never occur. Well-known examples of bubbles and crashes in stock prices and other asset prices include the 17th century Dutch tulip mania, the 18th century South Sea Bubble, the Wall Street Crash of 1929, the Japanese property bubble of the 1980s, the crash of the dot-com bubble in 2000–2001, the now-deflating United States housing bubble.
The 2000s sparked a real estate bubble where housing prices were increasing as an asset good. When a country that maintains a fixed exchange rate is forced to devalue its currency due to accruing an unsustainable current account deficit, this is called a currency crisis or balance of payments crisis; when a country fails to pay back its sovereign debt, this is called a sovereign default. While devaluation and default could both be voluntary decisions of the government, they are perceived to be the involuntary results of a change in investor sentiment that leads to a sudden stop in capital inflows or a sudden increase in capital flight. Several currencies that formed part of the European Exchange Rate Mechanism suffered crises in 1992–93 and were forced to devalue or withdraw from the mechanism. Another round of currency crises took place in Asia in 1997–98. Many Latin American countries defaulted on their debt in the early 1980s; the 1998 Russian financial crisis resulted in a devaluation of the ruble and default on Russian government bonds.
Negative GDP growth lasting two or more quarters is called a recession. An prolonged or severe recession may be called a depression, while a long period of slow but not negative growth is sometimes called economic stagnation; some economists argue. One important example is the Great Depression, preceded in many countries by bank runs and stock market crashes; the subprime mortgage crisis and the bursting of other real estate bubbles around the world led to recession in the U. S. and a number of other countries in late 2008 and 2009. Some economists argue that financial crises are caused by recessions instead of the other way around, that where a financial crisis is the initial shock that sets off a recession, other factors may be more important in prolonging the recession. In particular, Milton Friedman and Anna Schwartz argued that the initial economic decline associated with the crash of 1929 and the bank panics of the 1930s would not have turned into a prolonged depression if it had not been reinforced by monetary policy mistakes on the part of the Federal Reserve, a position supported by Ben Bernanke.
It is observed that successful investment requires each investor in a financial market to guess what other investors will do. George Soros has called th
John R. Commons
John Rogers Commons was an American institutional economist, Georgist and labor historian at the University of Wisconsin–Madison. John R. Commons was born in Hollansburg, Ohio on October 13, 1862. Commons had a religious upbringing. Commons was suffered from a mental illness while studying, he was allowed to graduate without finishing because of the potential seen in his intense determination and curiosity. At this time, Commons became a follower of Henry George's'single tax' economics, he carried this'Georgist' or'Ricardian' approach to economics, with a focus on land and monopoly rents, throughout the rest of his life, including a proposal for income taxes with higher rates on land rents. After graduating from Oberlin College, Commons did two years of graduate studies at Johns Hopkins University, where he studied under Richard T. Ely, but left without a degree. After appointments at Oberlin and Indiana University, Commons began teaching at Syracuse University in 1895. In spring 1899, Syracuse dismissed him as a radical.
Commons re-entered academia at the University of Wisconsin in 1904. Commons' early work exemplified his desire to unite Christian ideals with the emerging social sciences of sociology and economics, he was a frequent contributor to Kingdom magazine, was a founder of the American Institute for Christian Sociology, authored a book in 1894 called Social Reform and the Church. He was active in the national Prohibition Party. By his Wisconsin years, Commons' scholarship had become less moralistic and more empirical, he moved away from a religious viewpoint in his ethics and sociology. Commons is best known for developing an analysis of collective action by the state and other institutions, which he saw as essential to understanding economics. Commons believed that crafted legislation could create social change, he was a racist, evident in his belief that only northern Europeans, because of their "basic and innate qualities of intelligence, co-operation", could form Democratic societies. He continued the strong American tradition in institutional economics by such figures as the economist and social theorist Thorstein Veblen.
His notion of transaction is one of the most important contribution to Institutional Economics. The institutional theory was related to his remarkable successes in fact-finding and drafting legislation on a wide range of social issues for the state of Wisconsin, he drafted legislation establishing Wisconsin's worker's compensation program, the first of its kind in the United States. In 1934, Commons published Institutional Economics, which laid out his view that institutions were made up of collective actions that, along with conflict of interests, defined the economy, he believed that institutional economics added collective control of individual transactions to existing economic theory. Commons considered the Scottish economist Henry Dunning Macleod to be the "originator" of Institutional economics. Commons was a contributor to The Pittsburgh Survey, a 1907 sociological investigation of a single American city, his graduate student, John A. Fitch, wrote The Steel Workers, a classic depiction of a key industry in early 20th-century America.
It was one of six key texts to come out of the survey. Edwin E. Witte known as the "father of social security" did his PhD at the University of Wisconsin–Madison under Commons, he was a leading advocate of proportional representation in the United States, writing a book on the subject in 1907 and serving as vice-president of the Proportional Representation League. Commons undertook two major studies of the history of labor unions in the United States. Beginning in 1910, he edited A Documentary History of American Industrial Society, a large work that preserved many original-source documents of the American labor movement; as soon as that work was complete, Commons began editing History of Labor in the United States, a narrative work which built on the previous 10-volume documentary history. He died on May 11, 1945. Today, Commons's contribution to labor history is considered equal to his contributions to the theory of institutional economics, he made valuable contributions to the history of economic thought with regard to collective action.
He is honored at the University of Wisconsin in Madison with clubs named for him. His former home, now known as the John R. Commons House, is listed on the National Register of Historic Places. "An institution is defined as collective action in control and expansion of individual action." —"Institutional Economics" American Economic Review, vol. 21, pp. 648–657. "... But the smallest unit of the institutional economists is a unit of activity — a transaction, with its participants. Transactions intervene between the labor of the classic economists and the pleasures of the hedonic economists because it is society that controls access to the forces of nature, transactions are, not the "exchange of commodities," but the alienation and acquisition, between individuals, of the rights of property and liberty created by society, which must therefore be negotiated between the parties concerned before labor can produce, or consumers can consume, or commodities be physically exchanged..." —"Institutional Economics" American Economic Review, vol.
21, pp. 648–657. "It is an easy and patriotic matter for the lawyer, professor, employer, or investor, placed above the arena of competition, to proclaim the equal right of all races to American opportunities.