HCJ-Economics notes

HCJ

Economics

Economics analyses the production, distribution and consumption of goods, whilst explaining how economies work.
An economist would argue that money is the controlling force of the universe.

Adam Smith
Adam Smith believed in the utility theory, in which people make money as a means of boosting their own personal utility.-Utility being the measurement of money.
He believed that the self-interest was the main driving motive behind economics, and strongly argued that each person should be free to maximise their potential financially. And that state policies should be in order to maximise ones wealth.

Keynes

The main idea within Keynesian economics is that of ‘supply creating its own demand’.
Keynes attempted to develop a theory that would explain what determines saving, consumption, investment and production. In that theory, the interaction of aggregate demand and aggregate supply determines the level of output and employment in the economy.

Keynes was massively against over-saving and would encourage a society where people spend what they earn, similarly to that of Gordon Brown’s government. This is because, saving money cuts the demand.
He would argue that society should keep supplying, and keep demanding. He assumed that extra spending allows businesses enough money to hire more people and pay them, which in turn allows a further increase in consumer spending. This is because society can’t absorb profit.

A country where this theory appears to be strongly opposed is China, where government spending is kept at a minimum. In China spending is frowned upon, and the money is just collected and not spent. This means that there is not enough money to consume.