Introducción al Discurso

Primer parcial:

Keynesianism

Capitalism

Business Cycle

Political Economy

Inflation

Basic Economic Terms

CLASE 16/3

Elements of the Short Story:

 Setting.
 Place (Geographical location).
 Time – Past of the characters.
 Weather Conditions – feelings: sometimes to describe the feelings of the characters.
 Social conditions – clash among classes.
 Plot:
-Introduction: true beginning of a story where the characters and setting is revealed.
-Rising action: where the events of the story become complicated and the conflict of the
story is revealed (crisis points).
-Climax: this is the highest point of interest and the turning point of the story. The reader
wonders what happens next; will the conflict be resolved.
-Turning point: twists and turns of plot. Take very important decisions. Crucial. Momento
de decisión.
-Falling action: the events and complications begin to resolve themselves. The reader
knows what has happened.
-Denouement: untangling of events and final outcome. Final outcome or the untangling of
events.
 Conflict: external (struggle with the force outside oneself; far and beyond our forces or
control) or internal (struggle with oneself; way you act results in something).
More:
Man vs. Man: Physical. The leading character struggles with his physical strength against
other men.
Man vs. Circumstances: circumstances of life.
Man vs. Society: dealing character struggles against ideas, practices or customs of other
people. You can’t change the society.
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Man vs. Himself: Psychological. Self-destruction.

 Protagonist: of a story is the leading character. This character often takes on the role
of the good guy.
 Antagonist: is a person who actively opposes or is hostile to the protagonist. Tries to
sabotage the protagonist.
 Theme: controlling idea of the story.

That Was Then: Glossary of Literary Terms

Place: London.

Time: 60-70´s and present.

Social conditions: Nick is high-middle class and Natasha is middle-class.

First Exam

- 5 or 6 questions:

2 main principles of Keynes

2 types of capitalism

Variables of the

- Make sentences with the words underlined

Cuadernillo Economía:

What Is Keynesian Economics?

FINANCE & DEVELOPMENT, September 2014, Vol. 51, No. 3
Sarwat Jahan, Ahmed Saber Mahmud, and Chris Papageorgiou

The central tenet of this school of thought is that government intervention can stabilize the economy
Just how important is money? Few would deny that it plays a key role in the economy.
During the Great Depression of the 1930s, existing economic theory was unable either to explain the
causes of the severe worldwide economic collapse or to provide an adequate public policy solution
to jump-start production and employment.
British economist John Maynard Keynes spearheaded a revolution in economic thinking that
overturned the then-prevailing idea that free markets would automatically provide full
employment—that is, that everyone who wanted a job would have one as long as workers were
flexible in their wage demands (see box). The main plank of Keynes’s theory, which has come to bear
his name, is the assertion that aggregate demand—measured as the sum of spending by households,
Introducción al Discurso

businesses, and the government—is the most important driving force in an economy. Keynes further
asserted that free markets have no self-balancing mechanisms that lead to full employment.
Keynesian economists justify government intervention through public policies that aim to achieve full
employment and price stability.
The revolutionary idea
Keynes argued that inadequate overall demand could lead to prolonged periods of high
unemployment. An economy’s output of goods and services is the sum of four components:
consumption, investment, government purchases, and what net exports (the difference between
what a country sells to and buys from foreign countries). Any increase in demand has to come from
one of these four components. But during a recession, strong forces often dampen demand as
spending goes down. For example, during economic downturns uncertainty often erodes consumer
confidence, causing them to reduce their spending, especially on discretionary purchases like a
house or a car. This reduction in spending by consumers can result in less investment spending by
businesses, as firms respond to weakened demand for their products. This puts the task of increasing
output on the shoulders of the government. According to Keynesian economics, state intervention is
necessary to moderate the booms and busts in economic activity, otherwise known as the business
cycle.

There are three principal tenets in the Keynesian description of how the economy works:
• Aggregate demand is influenced by many economic decisions—public and private. Private sector
decisions can sometimes lead to adverse macroeconomic outcomes, such as reduction in consumer
spending during a recession. These market failures sometimes call for active policies by the
government, such as a fiscal stimulus package (explained below). Therefore, Keynesian economics
supports a mixed economy guided mainly by the private sector but partly operated by the
government.
• Prices, and especially wages, respond slowly to changes in supply and demand, resulting in
periodic shortages and surpluses, especially of labor.

Keynes the master

Keynesian economics gets its name, theories, and principles from British economist John Maynard Keynes
(1883–1946), who is regarded as the founder of modern macroeconomics. His most famous work, The
General Theory of Employment, Interest and Money, was published in 1936. But its 1930 precursor, A
Treatise on Money, is often regarded as more important to economic thought. Until then economics
analyzed only static conditions—essentially doing detailed examination of a snapshot of a rapidly moving
process. Keynes, in Treatise, created a dynamic approach that converted economics into a study of the
flow of incomes and expenditures. He opened up new vistas for economic analysis.
In The Economic Consequences of the Peace in 1919, Keynes predicted that the crushing conditions the
Versailles peace treaty placed on Germany to end World War I would lead to another European war.
He remembered the lessons from Versailles and from the Great Depression, when he led the British
delegation at the 1944 Bretton Woods conference—which set down rules to ensure the stability of the
international financial system and facilitated the rebuilding of nations devastated by World War II. Along
with U.S. Treasury official Harry Dexter White, Keynes is considered the intellectual founding father of the
International Monetary Fund and the World Bank, which were created at Bretton Woods.
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• Changes in aggregate demand, whether anticipated or unanticipated, have their greatest short-
run effect on real output and employment, not on prices. Keynesians believe that, because prices
are somewhat rigid, fluctuations in any component of spending—consumption, investment, or
government expenditures—cause output to change.
Stabilizing the economy
Rather than seeing unbalanced government budgets as wrong, Keynes advocated so-
called countercyclical fiscal policies that act against the direction of the business cycle. For example,
Keynesian economists would advocate deficit spending on labor-intensive infrastructure projects to
stimulate employment and stabilize wages during economic downturns.
Keynes argued that governments should solve problems in the short run rather than wait for market
forces to fix things over the long run, because, as he wrote, “In the long run, we are all dead.” This
does not mean that Keynesians advocate adjusting policies every few months to keep the economy
at full employment. In fact, they believe that governments cannot know enough to fine-tune
successfully.

What Is Capitalism?
FINANCE & DEVELOPMENT, June 2015, Vol. 52, No. 2
Sarwat Jahan and Ahmed Saber Mahmud

Free markets may not be perfect but they are probably the best way to organize an economy
Capitalism is often thought of as an economic system in which private actors own and control
property in accord with their interests, and demand and supply freely set prices in markets in a way
that can serve the best interests of society.
The essential feature of capitalism is the motive to make a profit. As Adam Smith, the 18th century
philosopher and father of modern economics, said: “It is not from the benevolence of the butcher,
the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”
Both parties to a voluntary exchange transaction have their own interest in the outcome, but neither
can obtain what he or she wants without addressing what the other wants. It is this rational self-
interest that can lead to economic prosperity.
In a capitalist economy, capital assets—such as factories, mines, and railroads—can be privately
owned and controlled, labor is purchased for money wages, capital gains accrue to private owners,
and prices allocate capital and labor between competing uses (see “Supply and Demand” in the June
2010 F&D).
Although some form of capitalism is the basis for nearly all economies today, for much of the last
century it was but one of two major approaches to economic organization. In the other, socialism,
the state owns the means of production, and state-owned enterprises seek to maximize social good
rather than profits.
Pillars of capitalism
Capitalism is founded on the following pillars:

 private property, which allows people to own tangible assets such as land and houses and
intangible assets such as stocks and bonds;
 self-interest, through which people act in pursuit of their own good, without regard for
sociopolitical pressure. Nonetheless, these uncoordinated individuals end up benefiting society
as if, in the words of Smith’s 1776 Wealth of Nations, they were guided by an invisible hand;
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 competition, through firms’ freedom to enter and exit markets, maximizes social welfare, that is,
the joint welfare of both producers and consumers;
 a market mechanism that determines prices in a decentralized manner through interactions
between buyers and sellers—prices, in return, allocate resources, which naturally seek the
highest reward, not only for goods and services but for wages as well;
 freedom to choose with respect to consumption, production, and investment—dissatisfied
customers can buy different products, investors can pursue more lucrative ventures, workers can
leave their jobs for better pay; and
 limited role of government, to protect the rights of private citizens and maintain an orderly
environment that facilitates proper functioning of markets.
The extent to which these pillars operate distinguishes various forms of capitalism. In free markets,
also called laissez-faire economies, markets operate with little or no regulation. In mixed economies,
so called because of the blend of markets and government, markets play a dominant role, but are
regulated to a greater extent by government to correct market failures, such as pollution and traffic
congestion; promote social welfare; and for other reasons, such as defense and public safety. Mixed
capitalist economies predominate today.
The many shades of capitalism
Economists classify capitalism into different groups using various criteria. Capitalism, for example,
can be simply sliced into two types, based on how production is organized. In liberal market
economies, the competitive market is prevalent and the bulk of the production process takes place in
a decentralized manner akin to the free-market capitalism seen in the United States and the United
Kingdom. Coordinated market economies, on the other hand, exchange private information through
non–market institutions such as unions and business associations—as in Germany and Japan (Hall
and Soskice, 2001).
More recently, economists have identified four types of capitalism distinguished according to the
role of entrepreneurship (the process of starting businesses) in driving innovation and the
institutional setting in which new ideas are put into place to spur economic growth (Baumol, Litan,
and Schramm, 2007).
In state-guided capitalism, the government decides which sectors will grow. Initially motivated by a
desire to foster growth, this type of capitalism has several pitfalls: excessive investment, picking the
wrong winners, susceptibility to corruption, and difficulty withdrawing support when it is no longer
appropriate. Oligarchic capitalism is oriented toward protecting and enriching a very narrow fraction
of the population. Economic growth is not a central objective, and countries with this variety have a
great deal of inequality and corruption.
Big-firm capitalism takes advantage of economies of scale. This type is important for mass
production of products. Entrepreneurial capitalism produces breakthroughs like the automobile,
telephone, and computer. These innovations are usually the product of individuals and new firms.
However, it takes big firms to mass-produce and market new products, so a mix of big-firm and
entrepreneurial capitalism seems best. This is the kind that characterizes the United States more
than any other country.
The Keynesian critique
During the Great Depression of the 1930s, the advanced capitalist economies suffered widespread
unemployment. In his 1936 General Theory of Employment, Interest, and Money, British economist
John Maynard Keynes argued that capitalism struggles to recover from slowdowns in investment
because a capitalist economy can remain indefinitely in equilibrium with high unemployment and no
growth. Keynesian economics challenged the notion that laissez-faire capitalist economies could
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operate well on their own without state intervention to promote aggregate demand and fight high
unemployment and deflation of the sort seen during the 1930s. He postulated that government
intervention (by cutting taxes and increasing government spending) was needed to pull the economy
out of the recession (see “What Is Keynesian Economics?” in the September 2014 F&D). These
actions sought to temper the boom and bust of the business cycle and to help capitalism recover
following the Great Depression. Keynes never intended to replace the market-based economy with a
different one; he asserted only that periodic government intervention was necessary.
The forces that generally lead to the success of capitalism can also usher in its failure. Free markets
can flourish only when governments set the rules that govern them—such as laws that ensure
property rights—and support markets with proper infrastructure, such as roads and highways to
move goods and people. Governments, however, may be influenced by organized private interests
that try to leverage the power of regulations to protect their economic position at the expense of the
public interest—for example, by repressing the same free market that bred their success.
Thus, according to Rajan and Zingales (2003), society must “save capitalism from the capitalists”—
that is, take appropriate steps to protect the free market from powerful private interests that seek to
impede its efficient functioning. The concentration of ownership of productive assets must be limited
to ensure competition. And, because competition begets winners and losers, losers must be
compensated. Free trade and strong competitive pressure on incumbent firms will also keep
powerful interests at bay. The public needs to

The forces that generally lead to the success of capitalism can also usher in its failure.

see the virtues of free markets and oppose government intervention in the market to protect
powerful incumbents at the expense of overall economic prosperity.
Economic growth under capitalism may have far surpassed that of other economic systems,
but inequality remains one of its most controversial attributes. Do the dynamics of private capital
accumulation inevitably lead to the concentration of wealth in fewer hands, or do the balancing
forces of growth, competition, and technological progress reduce inequality? Economists have taken
various approaches to finding the driver of economic inequality. The most recent study analyzes a
unique collection of data going back to the 18th century to uncover key economic and social patterns
(Piketty, 2014). It finds that in contemporary market economies, the rate of return on investment
frequently outstrips overall growth. With compounding, if that discrepancy persists, the wealth held
by owners of capital will increase far more rapidly than other kinds of earnings (wages, for example),
eventually outstripping them by a wide margin. Although this study has as many critics as admirers, it
has added to the debate on wealth distribution in capitalism and reinforced the belief among many
that a capitalist economy must be steered in the right direction by government policies and the
general public to ensure that Smith’s invisible hand continues to work in society’s favor.

Basic Economic Terms 2:

1. Economic growth: Adjective meaning of or relating to an economy or economics.

2. Fiscal: Adjective meaning related to public (i.e. government) finances (taxation, expenditure, etc.).
3. Economical: Adjective meaning using a minimum of resources; or cheap.
4. Inflation: A rise in the general level of prices, and an increase in the money supply.
5. Scarcity: A shortage of sometimes; insufficient supply to meet demand.
6. Capital: The accumulated stock of goods used for the production of further goods (and the money
required to purchase them).
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7. Cost of living: A measure of the amount of money that has to be paid for essentials such as food,
accommodation, heating, clothing, etc.
8. Standard of living: A measure of the amount of disposable income that people have to spend on both
necessities and luxuries.
9. Balance of payments: The difference between what a country pays for its imports and receives for its
exports.
10. Protectionism: The practice of restricting imports in order to increase the sales of domestic products
.
11. Fluctuate: To change constantly, to show irregular variation.
12. Economize: To save money, to reduce an amount normally used.

Political Economy:

1. mixed economy: an economy with both private and public sectors.

2. austerity: a word used to describe economic policies and measures designed to reduce inflation, the
quantity of imports, government spending, and so on.

3. public sector: all nationalized industries or services, such as education, health care, justice, public
transport.

4. market failures: situations in which free competition and the effects of supply and demand do not
operate (e.g. monopolies and oligopolies, and externalities).

5. laissez-faire: the belief that the economy works best when the state does not plan, control, or
interfere.

6. deregulation: the ending or relaxing of legal regulations or restrictions in a particular industry (e.g.
finance, television).

7. demand management: the Keynesian policy of stimulating an economy in a period of recession, and
contracting the economy if it overheats.

8. intervention: the neutral term that describes governmental action in the economy.

9. infrastructure: all the services such as roads, railways, electricity, telephones, etc. that exist in
developed countries.

10. crowd out: reduce the amount of money available for private investment by increasing government
borrowing.

https://quizlet.com/118906515/basic-economic-terms-flash-cards/ç

Inflation (complete with words):

Inflation is a rise in the general level of prices. It is caused by an excess of demand over supply, and is
related to an increase in the money supply. Single-digit inflation is usually described by economists as a
moderate inflation. Double or triple-digit inflation, which some countries have survived for quite long
periods, is known as galloping inflation. Inflation of four or more digits, as in Germany in the early 1920s,
and Argentina in the early 1980s, is known as hyperinflation.
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Prices in general tend to remain at the same anticipated level unless there are demand-pull or cost-push
shocks. If aggregate demand exceeds what a country can produce at full employment, prices will rise
(including wages, the price of labor): this is demand-pull inflation. But, for the last fifty years, costs have
pushed up prices and wages, even in recessions and periods of high unemployment: this is cost-push
inflation. Cost-push inflation is caused, for example, when unions demand wages that employers cannot
afford or when oil producers are able to raise their prices.
The opposite of inflation, when prices fall (generally for short periods), is deflation. Government policies
can be inflationary (often by accident), disinflationary or reflationary. Disinflationary policies might be aimed
at slowing down price inflation or at reducing imports; they involve reducing demand by raising taxation and
/ or cutting government spending. Reflationary policies, on the contrary, involve revitalizing a sluggish
economy by increasing consumer demand, either by cutting taxes or raising benefits, or relaxing monetary
and credit restrictions.
Inflation is measured by the retail price index (RPI) in Britain and the consumer price index (CPI) in the
US. These measure the cost of a ‘basket’ of goods and services, including food, clothing, housing, fuel,
transport and medical care. The individual items in price indices are weighted, meaning that allowance is
made for their relative importance in people’s spending.
Unless inflation is both balanced (affecting all prices and costs equally) and anticipated, it distorts
relative prices, tax rates and real interest rates. Unexpected inflation tends to benefit people with fixed
nominal interest rate debts, and so disadvantage creditors and people with fixed nominal interest rate
assets or non-index-linked pensions.

Make sentences with the following words or expressions:

Traducción de That Was Then: