Economics Questions and Answers

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What is a market and how does it work? What is Keynesian economics? What is Says law? How is fiscal policy related to the public debt? What are the tools of monetary policy? What is a fractional reserve banking system?

In economics, a market consists of buyers who demand a good supplied by sellers. Keynesian theory stresses the role played by demand while Say's Law emphasizes supply. Monetary and fiscal policy can both play a role in countering a recession. Most banks have fractional reserves that make up only part of their deposits.

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In economic theory, a market consists of sellers and buyers of a good. Typically supply of the good will be available at a price that buyers are willing to pay, so that supply is matched by demand. Economists have advanced a wide variety of theories related to markets. Microeconomics uses mathematics to study consumer behavior with a starting point in a stylized, rational individual attempting to maximize their utility under budget and other constraints. Macroeconomists study the effects of taxation, fiscal policy, and other factors influencing supply and demand on a larger scale.

Keynesian theory proposes remedies for market failures where there exists a mismatch between supply and demand. Based on the writings of John Maynard Keynes, a British economist, Keynesian theories emphasize the way governments through fiscal policy can stimulate demand to counter economic downturns.

Say's Law, formulated by the...

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