Plain Sense Economics

John Maynard Keynes’ prescription for government intervention to stimulate demand is getting more play in the media and salons these days. There is still some strong, insightful resistance to pure Keynesian policy directions, but his ideas are having something of a renaissance now that the Federal Reserve has lowered its target interest rate as far [...]

In our macroeconomics class yesterday we were talking about the relative effectiveness of different stimulus strategies. When we get to fiscal policy and Keynesian policies we will explore how an increase in government spending can, in theory, result in increases in GDP by several multiples. Also in this theoretical discussion we’ll see how tax cuts [...]

This may cause us to scratch our heads about the presence of a recession, but Casey Mulligan’s post in the New York Times Economix has some interesting points about gross domestic product. It is simple enough to be worth reading by principles of economics students.
The opening paragraph:
When measured in terms of financial gyrations and national [...]

For a very nice, clear explanation on how trade exports and import impact our GDP, see this posting from Economix.
Written by Bob McTeer, former president of the Federal Reserve Bank of Dallas:
Foreign trade has become more important to our economy in recent years. Exports and imports of goods and services have grown rapidly. A growing [...]

The National Bureau of Economic Research announced on Monday that we are in a recession and that this recession started back in December 2007. As we discuss in class, the common rule of thumb about recessions is that they represent at least two quarters of declining real GDP. Officially, however, NBER and their Business Cycle [...]

The Federal (Reserve) Open Market Committee (FOMC) announced last week that it was lowering its main interest rate target, the Fed Funds Rate, by one quarter of a percent. You can read the statement they released here.
Part of their statement and deliberations include concern about inflationary pressures. So they have to balance the need to [...]

We read/hear in the news media about changes to the U.S. trade deficit. This page from the Census Bureau shows that in the month of October, 2007 the trade deficit was $57.8 billion. That’s large in anyone’s book, but it is not ballooning as it has in earlier months. Two forces (at least) are at [...]

Tyler Cowan, who writes in the Marginal Revolution blog, contributed this piece in the November 18, 2008 of The Washington Post. He both defines and applies opportunity cost. Here’s an excerpt -
But all these figures don’t quite get at Iraq’s real cost. Indeed, we usually don’t even frame the question the right way. We’d [...]

When economic times are tough, we often look to the government to help steer us into better conditions. When a real recession hits and unemployment grows sufficiently to be a topic of conversation and news articles, government (by which I mean here Congress and the President) can provide some palliative relief – treating the symptoms. [...]

Financial and business news over the last week has focused on the rapid departure of two CEOs – Stan O’Neal with Merrill-Lynch and Charles Prince with CitiGroup. Each was tarred with unexpectedly large losses in the investment activities of their respective organizations. In very broad terms these losses are in the billions of dollars.
In my [...]