The Macroeconomics’ History (Essay Sample)
I want to describe Macroeconomics history, following time axis to describe the important person and theories in Macroeconomics.source..
The Macroeconomics’ History
Macroeconomics is a branch of economics which deals with aggregate economic variables. The variables include general economic factors such as national productivity and interest rates. Specifically, macroeconomics is concerned with market systems which operate on a large scale.
Moreover, the concept has developed over time with major economic theories and persons who influenced the changes. Majorly, the theories are developed to solve economic problems such as inflation, stagnant growth, or inflation. Therefore, the work focuses on the history of macroeconomics following the time axis by describing the major theories and important persons that brought the concept.
John Maynard Keynes founded the concept of macroeconomic theories, and he modeled or described the behaviors of the economy as a whole. Later, Adam Smith, who is regarded as the father of macroeconomics and John Stuart Mill later addressed the issues which would currently be recognized as the domain of macroeconomics. Ideally, the concept of macroeconomics is still relevant, and it is majorly applied to the financial markets and the investment process. Moreover, the concept of macroeconomics originated from the study of monetary theory and business cycles. The early people who developed the theory believed that monetary factors did not affect real factors including real output. However, Keynes disagreed with some of the early theories and developed a general theory which described the economy as a whole.
Classical Economic Theory
The theory was developed by Adam Smith and other proponents shortly after the emergence of the Industrial Revolution and Western Capitalism, which was at the end of the 18th century and the beginning of the 19th century. The theory attempted to explain the inner working of capitalism. Capitalism is the accumulation of resources by a few states to become wealthier than other nations which were observed among the British nations which colonized the US where they transported resources back to their home countries.
The proponents questioned the basic principles of capitalism where they argued that the players in the economy act voluntarily which produces the best outcome for every person. The idea is based on the concept of a self-regulating system where the prices and quantity produced are not determined by an authoritative board, but by the individual players in the economy (Hamilton 35). Further, the idea is based on the concept of an invisible hand where sellers will sell products at prices which the buyers are willing to pay. However, there will be no transaction if the two actors cannot have an agreement on the transaction because they act voluntarily.
Therefore, to avoid going out of business, one of the actors must improve the quality of the product or adjust the price. As a result, the concept of invisible hand ensures that a larger number of people receive the greatest satisfaction. Hence, the concept supports that those who are less fortunate in the society are at their position because they do not work hard to be stronger rivals to match the other competitors. Contrarily, Smith ignored the idea that the concept will make the wealthy to acquire more resources, the leading disgrace of the less fortunate which leads to a corrupt effect on society.
The Neoclassical Theory
However, the classical theory became irrelevant at the end of the 19th century developed a new theory known as neoclassical theories. Luckily, the theory did not reject the ideas of Smith and Ricardo and the other classicists but instead improved the concept. One of the parts that they improved was the improved use of precise metrics and scientific analysis since the 1...
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