CONTENT

INTRODUCTION.............................................................................3
1. MONETARY POLICY...................................................................4
1.1. Modern Monetary Policy...........................................................................5
1.2. The Effectiveness of Monetary Policy......................................................6
1.3. Operations of a Modern Central Bank......................................................6

2. PUBLIC FINANCES.....................................................................7
2.1. Public finance management.....................................................................8
2.2. Government expenditures........................................................................8

3. INTERNATIONAL EKONOMICS.................................................9
4. ECONIMICS OF LABOUR.........................................................10
5. INDUSTIAL ORGANISATION....................................................11
6. AGRICULTURAL ECONOMICS................................................12
7. DEVELOPMENT ECONOMICS.................................................13
CONCLUSION...............................................................................14
LITERATURE.................................................................................15

INTRODUCTION
In this paper we will be familiarize from different areas of economics. Following
are different areas, of economics.
Monetary Policy - the control of the amount of money circulating in the
economy to influence interest rates, savings, investments, inflation rates, and growth
rate.
Public Finance - studies the economic impact of the government's monetary
and fiscal policies.
International Economics - focuses on the global economy, specifically on
international trade and business.
Economics of Labor - discusses the theory, state, and value of labor in a
country's economy.
Industrial Organization - is primarily concerned with the structure of the market,
the role of the government, and the regulations for monopolies.
Agricultural Economics - gives importance to the agricultural sector of the
economy.
Development Economics or Economic Development - studies the economic
situation of developing countries such as those in Africa, Asia, and Latin America.

1. MONETARY POLICY
Monetary policy is one of the tools that a national Government uses to
influence its economy. Using its monetary authority to control the supply and
availablity of money, a government attempts to influence the overall level of economic
activity in line with its political objectives. Usually this goal is "macroeconomic
stability" - low unemployment, low inflation, economic growth, and a balance of
external payments. Monetary policy is usually administered by a Government
appointed "Central Bank", the Bank of Canada and the Federal Reserve Bank in the
United States.
Central banks have not always existed. In early economies, governments
would supply currency by minting precious metals with their stamp. No matter what
the creditworthiness of the government, the worth of the currency depended on the
value of its underlying precious metal. A coin was worth its gold or silver content, as it
could always be melted down to this. A country's worth and economic clout was
largely to its holdings of gold and silver in the national treasury. Monarchs, despots
and even democrats tried to skirt this inviolate law by filing down their coinage or
mixing in other substances to make more coins out of the same amount of gold or
silver. They were inevitably found out by the traders, money lenders and others who
depended on the worth of that currency. This the reason that movies show pirates
and thieves biting Spanish dubloons to ascertain the value of their booty and loot.
The advent of paper money during the industrial revolution meant that it wasn't
too difficult for a country to alter its amount of money in circulation. Instead of gold, all
that was needed to produce more banknotes was paper, ink and a printing press.
Because of the skepticism of all concerned, paper money was backed by a "promise
to pay" upon demand. A holder of a "pound sterling" note of the United Kingdom
could actually demand his pound of silver! When gold became the de facto backing
of the world's currency a "gold standard" was developed where nations kept sufficient
gold to back their "promises to pay" in their national treasuries. The problem with this
standard was that a nation's economic health depended on its holdings of gold.
When the treasury was bare, the currency was worthless.
In the 1800s, even commercial banks in Canada and the United States issued
their own banknotes, backed by their promises to pay in gold. Since they could lend

more than they had to hold in reserves to meet their depositers demands, they
actually could create money. This inevitably led to "runs" on banks when they could
not meet their depositers demands and were bankrupt. The same happened to
smaller countries. Even the United States Treasury had to be rescued by JP Morgan
several times during this period. In the late 1800s and early 1900s, countries
legislated their exclusive monopoly to issue currency and banknotes. This was in
response to "financial panics" and bank insolvencies. This meant that all currency
was issued and controlled by the national governments, although they still
maintained gold reserves to support their currencies. Commercial banks still could
create money by lending more than their depositors had placed with the bank, but
they no longer had the right to issue banknotes.
1.1. Modern Monetary Policy
Modern central banking dates back to the aftermath of great depression of the
1930s. Governments, led by the economic thinking of the great John Maynard
Keynes, realized that collapsing money supply and credit availability greatly
contributed to the savagery of this depression. This realization that money supply
affected economic activity led to active government attempts to influence money
supply through "monetary policy". At this time, nations created central banks to
establish "monetary authority". This meant that rather than accepting whatever
happened to money supply, they would actively try to influence the amount of money
available. This would influence credit creation and the overall level of economic
activity.
Modern monetary policy does not involve gold to a great extent. In 1968, the
United States rescinded its promise to pay in gold and effectively removed itself from
the "gold standard". Since then, it has been the job of the Federal Reserve to control
the amount of money and credit in the U.S. economy. I doing this, it wants to maintain
the purchasing power of the U.S. dollar and its comparative worth to other
currencies. This might sound easy, but it is a complex task in an information age
where huge amounts of money travels in electronic signals in microseconds around
the world.

1.2. The Effectiveness of Monetary Policy

Economists debate the relevant measures of money supply. "Narrow" money
supply or M1 is currency in circulation and the currency in easily accessed chequing
and savings accounts. "Broader" money supply measures such as M2 and M3
include term deposits and even money market mutual funds. Economists debate the
finer points of the implementation and effectiveness of monetary policy but one thing
is obvious. At the extremes, monetary policy is a potent force.
At the other extreme, restrictive monetary policy has shown its effectiveness
with considerable force. Germany, which experienced hyperinflation during the
Weimar Republic and never forgot, has maintained a very stable monetary regime
and resulting low levels of inflation.
Without much debate, the effectiveness of monetary policy, its timing and its
eventual impacts on the economy are not obvious. That central banks attempt
influence the economy through monetary is a given. In any event, insights into
monetary policy are very important to the investor. The availability of money and
credit are key considerations in the pricing of an investment.
1.3. Operations of a Modern Central Bank
The Central Bank attempts to achieve economic stability by varying the
quantity of money in circulation, the cost and availability of credit, and the
composition of a country's national debt. The Central Bank has three instruments
available to it in order to implement monetary policy:
Open market operations
Reserve requirements
The 'Discount Window'
Open market operations are just that, the buying or selling of Government
bonds by the Central Bank in the open market. If the Central Bank were to buy
bonds, the effect would be to expand the money supply and hence lower interest
rates, the opposite is true if bonds are sold. This is the most widely used instrument
in the day to day control of the money supply due to its ease of use, and the relatively
smooth interaction it has with the economy as a whole.
Reserve requirements are a percentage of commercial banks, and other
depository institutions, demand deposit liabilities that must be kept on deposit at the

Central Bank as a requirement of Banking Regulations. Though seldom used, this

percentage may be changed by the Central Bank at any time, thereby affecting the
money supply and credit conditions. If the reserve requirement percentage is
increased, this would reduce the money supply by requiring a larger percentage of
the banks, and depository institutions, demand deposits to be held by the Central
Bank, thus taking them out of supply.
By affecting the money supply, it is theorized, that monetary policy can
establish ranges for inflation, unemployment, interest rates ,and economic growth. A
stable financial environment is created in which savings and investment can occur,
allowing for the growth of the economy as a whole.

2. PUBLIC FINANCES
The proper role of government provides a starting point for the analysis of
public finance. In theory, under certain circumstances private markets will allocate
goods and services among individuals efficiently. If private markets were able to
provide efficient outcomes and if the distribution of income were socially acceptable,
then there would be little or no scope for government. In many cases, however,
conditions for private market efficiency are violated. For example, if many people can
enjoy the same good at the same time, then private markets may supply too little of
that good. National defense is one example of non-rival consumption, or of a public
good.
"Market failure" occurs when private markets do not allocate goods or services
efficiently. The existence of market failure provides an efficiency-based rationale for
collective or governmental provision of goods and services. Externalities, public
goods, informational advantages, strong economies of scale, and network effects can
cause market failures. Public provision via a government or a voluntary association,
however, is subject to other inefficiencies, termed "government failure."
Under broad assumptions, government decisions about the efficient scope and
level of activities can be efficiently separated from decisions about the design of
taxation systems. In this view, public sector programs should be designed to
maximize social benefits minus costs, and then revenues needed to pay for those

expenditures should be raised through a taxation system that creates the fewest
efficiency losses caused by distortion of economic activity as possible. In practice,
government budgeting or public budgeting is substantially more complicated and
often results in inefficient practices.
Government can pay for spending by borrowing, although borrowing is a
method of distributing tax burdens through time rather than a replacement for taxes.
A deficit is the difference between government spending and revenues. The
accumulation of deficits over time is the total public debt. Deficit finance allows
governments to smooth tax burdens over time, and gives governments an important
fiscal policy tool. Deficits can also narrow the options of successor governments.
Public finance is closely connected to issues of income distribution and social
equity. Governments can reallocate income through transfer payments or by
designing tax systems that treat high-income and low-income households differently.
2.1. Public finance management
Collection of sufficient resources from the economy in an appropriate manner
along with allocating and use of these resources efficiently and effectively constitute
good financial management. Resource generation, resource allocation and
expenditure management are the essential components of a public financial
management system.
Public Finance Management basically deals with all aspects of resource
mobilization and expenditure management in government. Just as managing
finances is a critical function of management in any organization, similarly public
finance management is an essential part of the governance process. Public finance
management includes resource mobilization, prioritization of programmes, the
budgetary process, efficient management of resources and exercising controls.
Rising aspirations of people are placing more demands on financial resources. At the
same time, the emphasis of the citizenry is on value for money, thus making public
finance management increasingly vital.
2.2. Government expenditures
Economists classify government expenditures into three main types.
Government purchases of goods and services for current use are classed as
government consumption. Government purchases of goods and services intended to
7

create future benefits such as infrastructure investment or research spending are

classed as government investment. Government expenditures that are not purchases
of goods and services, and instead just represent transfers of money such as social
security payments are called transfer payments.

3. INTERNATIONAL ECONOMICS
International economics is concerned with the effects upon economic activity of
international differences in productive resources and consumer preferences and the
institutions that affect them. It seeks to explain the patterns and consequences of
transactions and interactions between the inhabitants of different countries, including
trade, investment and migration.economies of scale are benefits from bulk buying.
International trade studies goods and services flows across international
boundaries from supply and demand factors, economic integration, international
factor movements, and policy variables such as tariff rates and trade quotas. The
economic theory of international trade differs from the remainder of economic theory
mainly because of the comparatively limited international mobility of the capital and
labour. In that respect, it would appear to differ in degree rather than in principle from
the trade between remote regions in one country.
The branch of trade theory which is conventionally categorized as "classical"
consists mainly of the application of deductive logic, originating with Ricardos Theory
of Comparative Advantage and developing into a range of theorems that depend for
their practical value upon the realism of their postulates. "Modern" trade theory, on
the other hand, depends mainly upon empirical analysis.
International finance studies the flow of capital across international financial
markets, and the effects of these movements on exchange rates.
The economics of international finance do not differ in principle from the
economics of international trade but there are significant differences of emphasis.
The practice of international finance tends to involve greater uncertainties and risks
because the assets that are traded are claims to flows of returns that often extend
many years into the future. Markets in financial assets tend to be more volatile than
markets in goods and services because decisions are more often revised and more

rapidly put into effect. There is the share presumption that a transaction that is freely
undertaken will benefit both parties, but there is a much greater danger that it will be
harmful to others.
Although the majority of developed countries now have "floating" exchange
rates, some of them together with many developing countries maintain exchange
rates that are nominally "fixed", usually with the US dollar or the euro. The adoption
of a fixed rate requires intervention in the foreign exchange market by the countrys
central bank, and is usually accompanied by a degree of control over its citizens
access to international markets.
Some governments have abandoned their national currencies in favour of the
common currency of a currency area such as the "eurozone" and some, such as
Denmark, have retained their national currencies but have pegged them at a fixed
rate to an adjacent common currency. On an international scale, the economic
policies promoted by the International Monetary Fund have had a major influence,
especially upon the developing countries.
Their recommended economic policies are broadly those that have been
adopted in the United States and the other major developed countries and have often
included the removal of all restrictions upon incoming investment. The Fund has
been severely criticised by Joseph Stiglitz and others for what they consider to be the
inappropriate enforcement of those policies and for failing to warn recipient countries
of the dangers that can arise from the volatility of capital movements.
International monetary economics and macroeconomics studies money and
macro flows across countries.

4. ECONIMICS OF LABOUR
Labor economics seeks to understand the functioning and dynamics of the
market for labor. Labor markets function through the interaction of workers and
employers. Labor economics looks at the suppliers of labor services (workers), the
demands of labor services (employers), and attempts to understand the resulting
pattern of wages, employment, and income.

In economics, labor is a measure of the work done by human beings. It is

conventionally contrasted with such other factors of production as land and capital.
There are two sides to labour economics. Labour economics can generally be
seen as the application of microeconomic or macroeconomic techniques to the
labour market. Microeconomic techniques study the role of individuals and individual
firms in the labour market. Macroeconomic techniques look at the interrelations
between the labour market, the goods market, the money market, and the foreign
trade market. It looks at how these interactions influence macro variables such as
employment levels, participation rates, aggregate income and Gross Domestic
Product.

5. INDUSTIAL ORGANISATION
The Centre for Co-operation with European Economies in Transition, created
in March 1990, is the focal point for co-operation between the OECD and central and
eastern European countries and the former Soviet republics. Its major responsibility
is to design and manage a programme of policy advice, technical assistance and
training which puts the expertise of the Secretariat and Member countries at the
disposal of countries engaged in economic reform.
In all these activities, the Centre maintains close relations with other
multilateral bodies with the mutual objective of ensuring the complementarity of
respective efforts to support economic reforms in Central and Eastern Europe and
the former Soviet Union.
Barriers to entry are factors which prevent or deter the entry of new firms into
an industry even when incumbent firms are earning excess profits. There aretwo
broad classes of barriers: structural and strategic. These twoclasses are also often
referred to as economic and behavioural barriers to entry.
Structural barriers to entry arise from basic industry characteristics such as
technology, costs and demand. There is some debate over what factors constitute
relevant structural barriers. The widest definition, that of Joe Bain, suggests that
barriers to entry arise from product differentiation, absolute cost advantages of
incumbents, and economies of scale. Product differentiation creates advantages for

10

incumbents because entrants must overcome the accumulated brand loyalty of

existing products. Absolute cost advantages imply that the entrant will enter with
higher unit costs at every rate of output, perhaps because of inferior technology.
Scale economies restrict the number of firms which can operate at minimum costs in
a market of given size. Other economists would emphasize the importance of sunk
costs as a barrier to entry.
Since such costs must be incurred by entrants, but have already been borne
by incumbents, a barrier to entry is created. In addition, sunk costs reduce the ability
to exit and thus impose extra risks on potential entrants.
Strategic barriers to entry arise from the behaviour of incumbents. In particular,
incumbents may act so as to heighten structural barriers or threaten to retaliate
against entrants if they do enter. Such threats must, however, be credible in the
sense that incumbents must have an incentive to carry them out if entry does occur.
Strategic entry deterrence often involves some kind of pre-emptive behaviour by
incumbents. One example is the pre-emption of facilities by which an incumbent
over-invests in capacity in order to threaten a price war if entry occurs. Another would
be the artificial creation of new brands and products in order to limit the possibility of
imitation. This possibility remains subject to considerable debate.

6. AGRICULTURAL ECONOMICS
Agricultural economics originally applied the principles of economics to the
production of crops and livestock a discipline known as agronomics. Agronomics was
a branch of economics that specifically dealt with land usage. It focused on
maximizing the crop yield while maintaining a good soil ecosystem. Throughout the
20th century the discipline expanded and the current scope of the discipline is much
broader. Agricultural economics today includes a variety of applied areas, having
considerable overlap with conventional economics.
Agricultural economists have made many well-known contributions to the
economics field with such models as the cobweb model, hedonic regression pricing
models, new technology and diffusion models (Zvi Griliches),[10] multifactor
productivity and efficiency theory and measurement, and the random coefficients

11

regression. The farm sector is frequently cited as a prime example of the perfect
competition economic paradigm.

7. DEVELOPMENT ECONOMICS
Development Economics is a branch of economics which deals with economic
aspects of the development process in low-income countries. Its focus is not only on
methods of promoting economic growth and structural change but also on improving
the potential for the mass of the population, for example, through health and
education and workplace conditions, whether through public or private channels.
Development economics involves the creation of theories and methods that aid
in the determination of policies and practices and can be implemented at either the
domestic or international level.This may involve restructuring market incentives or
using mathematical methods like inter-temporal optimization for project analysis, or it
may involve a mixture of quantitative and qualitative methods.
The earliest ancient Western theory of development economics was
mercantilism, which developed in the 17th century, paralleling the rise of the nation
state. Earlier theories had given little attention to development. For example,
Scholasticism the dominant school of thought during medieval feudalism,
emphasized reconciliation with

Christian theology and ethics, rather than

development. The 16th and 17th century School of Salamanca, credited as the
earliest modern school of economics, likewise did not address development
specifically.
Mercantilist ideas continue in the theories of economic nationalism and
neomercantilism.
Unlike in many other fields of economics, approaches in development
economics may incorporate social and political factors to devise particular plans. Also
unlike many other fields of economics, there is "no consensus" on what students
should know. Different approaches may consider the factors that contribute to
economic convergence or non-convergence across households, regions, and
countries.

12

CONCLUSION
The cumulative logic of intervention is demonstrated in many other areas. For
instance, government subsidization of poverty increases poverty and unemployment
and encourages the beneficiaries to multiply their offspring, thus further intensifying
the problem that the government set out to cure. Government outlawing of narcotics
addiction greatly raises the price of narcotics, driving addicts to crime to obtain the
money.
There is no need to multiply examples; they can be found in all phases of
government intervention. The point is that the free-market economy forms a kind of
natural order, so that any interventionary disruption creates not only disorder but the
necessity for repeal or for cumulative disorder in attempting to combat it. In short,
Proudhon wrote wisely when he called Liberty the Mother, not the Daughter, of
Order. Hegemonic intervention substitutes chaos for that order.
Such are the laws that praxeology presents to the human race. They are a
binary set of consequences: the workings of the market principle and of the
hegemonic principle. The former breeds harmony, freedom, prosperity, and order; the
latter produces conflict, coercion, poverty, and chaos. Such are the consequences
between which mankind must choose. In effect, it must choose between the society
of contract and the society of status. At this point, the praxeologist as such retires
from the scene; the citizen the ethicist must now choose according to the set of
values or ethical principles he holds dear.

13

LITERATURE
1. Ragnar Frisch, Econometrica, (1933), 1, pp. 1-2.
2. Murray N. Rothbard, Praxeology: Reply to Mr. Schuller, American Economic
Review, December, 1951, pp. 94346.
www.investopedia.com
en.wikipedia.org/wiki/Economics
www.sciencedirect

14