POPP2406 Week 2 Mind map

  • Created by: Elizbooks
  • Created on: 06-05-22 16:42
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  • POPP2406 Week 2
    • Ideologies
      • Liberalism, Keynesiansism and Marxism
        • All have different ideas to fix the 'troubled marriage' relationship between gov and business
        • How best to control +  distribute resources?
    • Liberalism, classical and neoclassical economics
      • 16-17th century - tightly regulated state to gain power and wealth was collected as gold
        • Merchant challenged this - trade became the source of wealth and not gold anymore
      • Invisible hand theory by Adam Smith
        • (Craig 2006) People gain benefits by following their own interests
          • Customers control demand and suppliers respond by supplying more goods to the market
            • Demand and supply meet at an equilibrium point - enough to supply the demand from customers
              • if price is too high there are not enough customers to purchase which leads to unsold products
              • If price too low, producers will not make enough money = shortage in goods supplied
      • Liberal economics - firms want to supply more goods and set market prices
        • Idea: Government should remove restrictions on businesses e.g. add incentives to market
          • Better investments, more freedom, more choice, less restrictions
      • Problems
        • Does not deal with economic crises well
          • Wall Street Crash and Global Financial Crash
    • Keynesian economics: history
      • Attempt to resolve problem with economic crises cycles
        • Gov intervention needed to fix/avoid economic crises to minimise costs
      • Gov can use counter-cyclical measures/fiscal policies to maintain growth and enhance welfare
      • Gov should borrow if required and use deficit spending to help with reduced investments and to boost consumer spending habits and control total demand
        • Demand is needed to enhance the economic system
      • Generous welfare state benefits numerous people - mainly poorer people
        • It reduces unemployment and redistributes wealth to poorer people which means they can still purchase goods and services - enhances economy
    • Marxism
      • Aware that capitalist systems have periods of crises
        • Businesses in the long-term aim to increase wages to boost consumption but if all decrease wages to increase profit, then consumption will reduce which could equate to a crisis
          • Significant that the state find ways to control and monitor this situation and fix this problem
        • Government will create policies that benefit capitalism because they depend on businesses for economic growth
          • Education - highly qualified workforce
          • Infrastructure and investments  - improves productivity levels
    • Government must balance the interests of all firms due to their difference and uniqueness
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