Principles of Macroeconomics Coursework Example

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Principles of Macroeconomics
Question one
Indirect and direct financing paths are the two different paths that farms seek funding to enable payment for their resources so to enhance their production through loanable funds market. In the case of indirect financing it occurs in situations where savers deposit their funds into banks, the funds are then loaned to the borrowers by the banks. Direct funding happens whenever borrowers seek savers directly so that they can obtain funds. Therefore, direct finance is achieved through the contracts which specify terms and conditions related to the loans thus the contracts are referred as securities (Mateer and Coppock).
Question Two
The short-run aggregate curves assume that the capital level is fixed that is one cannot build another new factory. However, it’s possible to increase the utilization of factors of production that are existing. Moreover, the long run aggregate curves are determined by all factors meant for production such as labor productivity, size of the available workforce, education level and the size of capital stock. The difference between the aggregate curves is that the short run aggregate curves are based on the assumption that factors that led to aggregate supply are held constant whereas in the case of long run they are not held constant. As a result of all determinants being held constant, the Short-run curves are sloped thus upward sloping. In contrast, the Long Run Aggregate curves are vertical as in the case of the Long run there lacks a correlation between the actual level of production as well as the price level in the economy (Mateer and Coppock).

Question Three
Keynesianism comprises of different macroeconomics theories regarding how in the short run especially in the cases of recessions the aggregate demand influences the economy’s output. According to the Keynesian, the demand is not equal to the economy’s productive level thus influenced by different conditions and in some cases behaves erratically affecting employment, inflation, and production. Keynesians Economist always argues that whenever aggregate demand is unstable still argue that whenever aggregate demand is unpredictable and volatile, a market economy experiences inefficient outcomes regarding economic recessions whenever there are low demand and inflation in case of high demand (Mateer and Coppock).
These conditions can be controlled by the economic responses particularly the monetary policy activities that are conducted by Central Bank together with the help fiscal policy actions done by the government that helps in stabilizing output over the existing business cycles. The Keynesians advocate well-managed economy significantly the private sector although together with an active function of the government intervention at the time of recessions and depressions. Therefore, as a Keynesian economist, I would advise the government to increase the spending as well as run a massive deficit so that to boost demand and thus to push the economy back relating to its growth. Ideally, regarding unemployment, the government can reduce the challenge directly through jobs creation. Secondly, as the government is institution is centralized rather than subtly nudging a significant number of people and businesses to raise investment the government can as well turn on a fire horse. Finally, private investments the private investments always risk firms and individual’s supply of credit and money. For instance, the last recession in the nation most companies were not ready to reinvest back in the economy as they feared to lose a lot of their cash.
Work cited
Mateer, G. Dirk, and Lee Coppock. Principles of Macroeconomics. Print.