The business cycle is something you will frequently hear economists mention. It is often discussed in relation to a countries economic performance or how markets are behaving on a global scale. It seems to be quite an important concept so what does it actually refer to?
Those who listen to the financial news may have heard the term ‘Keynesian economics’ floated around. There may be some confusion as to what this is actually referring to. Discussions about the validity of this theory can become heated among economists so it is worth having some idea as to what is behind it all. A basic explanation will be provided here.
John Maynard Keynes called gold “the barbarous relic”. Now, long after Keynes’ school of economics became unfashionable, gold is once again in fashion, hitting an all time dollar record even when other metals and commodities have dived in price as a result of poor industrial demand. So what is driving the gold price?
Quantitative Easing is essentially the creation of money. As we live in a digital age, the money is not even printed any more but simply created on computers. How come we aren’t seeing prices rise?
From a macroeconomic perspective, households, government and firms (corporations) are the 3 fundamental players of money and resources. This flowchart diagram below illustrates how they interact and exchange resources.
Firms and households interact and exchange resources in the big Circular Flow of Income illustrated by the diagram below.
Transfer payments are given by government of various levels to under-privileged society members like unemployed workers, the elderly who’s unable to maintain a decent life by inability to work and such.
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