Effectiveness of the Interest Rate Adjustment Coursework

Effectiveness of the Interest Rate Adjustment - Coursework Example nt levels in the economy, when there is an increase in the interest rates then the lower will be the rate of investment while a reduction in the interest rates then there will be an increase in investment. When investment increases it will result to demand push inflation which originates from the real sector, when investment increases then the aggregate demand will increase and this will result into inflation. However when the investment levels increase then we expect the level of employment and income in the economy to increase, this will be beneficial to the economy where the rate of employment will increase and the output level of the economy will also increase in terms of GDP. According to Keynes theory on the demand for money he highlighted that individuals will demand money for speculative purposes, precautionary purposes and liquidity preferences. Speculative demand for money occurs where the individuals will prefer to hold money as an asset when other assets do look attractive, The level of speculative demand for money will depend on the interest rates and the income levels, when interest rates are high then the speculative demand for money is lower and when the interest rates are lower then the individuals will hold more speculative money demand, for this reason therefore individuals will hold more money and will not invest when the interest rates are high but when the interest rates are low the individuals will hold less speculative money and they will invest in other assets. Consumption behaviour and interest rates: According to Keynes consumption constitutes the largest proportion of expenditure in an economy, however in his theory he defined consumption as a function of income, consumption therefore was equal to the autonomous consumption level... This paper offers a comprehensive review of the relationships between interest rates, investment behaviour and level of consumption with the help of the postulates of Keynesian theory. It is shown, that when interest rates are adjusted they will affect the level of borrowed funds. Interest rates will therefore affect the consumption behaviour and at the same case affect the investment behaviour in the economy. Interest rates can also determine the amount of money supply in an economy, and because the higher the money supply then the higher the inflationary pressure interest rates are used as a way to fight inflation in an economy Investment can be defined as accumulation over time by firms of real capital goods and these goods yield the future flow and acquisition of other goods, investment levels in an economy will be determined by the interest rates which are the opportunity costs of borrowed funds. Consumption constitutes the largest proportion of expenditure in an economy, however in his theory he defined consumption as a function of income, consumption therefore was equal to the autonomous consumption level plus the marginal propensity to consume which is multiplied by the income minus tax. Consumption is affected by changes in the level of interest rates, when interest rates are high then the demand for borrowed fund will decline and therefore the less the ability by consumers to spend, when interest rates are low then the demand for borrowed funds increase and for this reason the higher the ability by consumers to spend.

Mark Steinberg's Voices of Revolution Essay Example | Topics and Well Written Essays - 1250 words

Mark Steinberg's Voices of Revolution - Essay Example Steinberg re-hashes the demonstrations of June and the days of July giving extra-special detail to top-level political decisions and machinations. In analyzing the activity of the lower class, he highlights looting and violence, that he refers to as protests of the lower class. He concludes that this â€Å"gave expression to a good deal of clearly directed anger and hatred† (Steinberg & Schwartz, 2003 p270). Steinberg points out in this section that moderate socialists, the far left, Kerensky and the re-energized right were of the opinion that only firm order would halt the further disintegration of Russia (Steinberg & Schwartz, 2003 p273). Steinberg continues to put emphasis on an effort, born of his own consciousness, to veer Bolshevism away from the center of this narrative. He does this by devoting more attention to the creation of Kerensky’s directory, for example, as well as the democratic conference and Moscow State Conference (Steinberg & Schwartz, 2003 p275). He does this instead of dwelling on the Bolshevik emergence in a majority of the soviets and the power seizure in October. Steinberg in this section explains the crisis and social breakdown that plagued Russia in this period by using the October revolution. The October revolution was about every-day people claiming power over their daily lives and the circumstances governing that life they held dear. Worth noting, however, is that Steinberg’s analysis, especially as laid down in this section, gives decreased attention to the rational approach of their efforts. The decreased attention to this is at the expense of their expressive and emotiona l intent, in particular the desire for retribution by the lower class on the social elites (Steinberg & Schwartz, 2003 p277). On July 1, there were demands of â€Å"all power to the soviets† by the second Gun regiment, as the third infantry regiment declined to send companies as a replacement to the front. Immediately after reception of orders to send help to the front, machine gunners in their thousands held an impromptu meeting to plan artillery backed insurrection. As the Bolsheviks attempted to calm things down, anarchists added more wood to the fire. The soldiers, fully armed took a decision to march while sending delegates from factories that, as workers, had to drop everything and join in the march. Soon, over 50,000 of them went marching all the while demanding All Power to the people (Steinberg & Schwartz, 2003 p279). The Bolsheviks at this point had no choice but to support the masses as long as they were peaceful in