- Subject index
Macroeconomics Simplified explains the intuition behind Keynesian and neoclassical macroeconomics using graphs and simple algebra.
It provides students with a strong conceptual basis for understanding the tension between Keynesian and neoclassical systems that has once again came to the forefront since the 2007–08 financial crisis.
The book shows how theoretical perspectives affect macroeconomic policy choices and proposes a pragmatic approach to policy that is sensitive to prevailing economic conditions. Students of economics and business alike will enjoy its concise and engaging analysis and find the applications and references to the Indian economy helpful.
Chapter 10: Credit and Crisis: An Epilogue
Credit and Crisis: An Epilogue
The 2008 global economic crisis highlighted a key feature of capitalism which mainstream economic theory pays limited attention to: its highly unstable character and proclivity for financial crises. Indeed, the neoclassical approach, which holds that financial markets are efficient (prices on traded assets are assumed to reflect all known information) and that rational expectations prevail (outcomes do not differ significantly from what they are expected to be), is totally ill-equipped to deal with financial crises. This is a serious problem because speculative bubbles and busts are common under capitalism and their effects are harmful. As Keynes warned us long ago:
Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is ...