Neutrality of Money Concept in Macroeconomics Essay

Neutrality of Money Concept in Macroeconomics - Essay Example This paper offers a comprehensive analysis of the evolution of views of different economic schools of thought on the concept of money neutrality. Neutrality of money had been a concept popularised by classical economists who assumed that output at any point of time is being produced at the full employment level and hence, cannot be adjusted in the short run. Change in money supply could actually lead to a change in the general price level of the economy without creating any influence over its aggregate demand and supply schedules, rate of employment and interest rate. Thus, varying the amount of money in circulation in an economy could actually result to a controlled inflationary environment in the concerned nation. The primary reason behind the applicability of neutrality of money is the inelastic aggregate supply curve in the economy. A rigid supply results to a rise in price level in the nation though relative price of commodities remain fixed. On the other hand, as wages also increase proportionally, there is no adjustment on the aggregate demand frontier. Hence, the impact of a change in money supply only results to a change in the general price level in the short run. The dissection between real and nominal variables as made by classical economists led to the development of a result called classical dichotomy. The concept has been revised a large number of times by economists belonging to successive schools of thought. As it has been found that neutrality of money holds only during the long run. ... This is the reason why the concept has been revised a large number of times by economists belonging to successive schools of thought. Explanations provided by Macroeconomic schools of thought The following paragraphs elaborate the stance posed by various macroeconomic schools of thought regarding the neutrality of money. It was proposed first by the classical economists but had later been revised by its successors during different real-life economic crises. Classical Economics The classical economists were of the view that a change in money supply actually does not affect aggregate supply in the nation. In fact, they assumed aggregate supply of money to be inelastic at any point of time. In other words, the economy always produces at its full employment level so that the equilibrium output being produced is always fixed. In the short run, the position of the schedule stays fixed while in the long run, it shifts horizontally without creating any impact on the slope of the curve. Hence , a rise in money supply actually results to a shift in the aggregate demand given the immediate rise in the wage structures. The diagram alongside illustrates the situation which had been depicted by the classical economists. It shows that a rise in money supply in the economy results to a vertical shift in the aggregate demand curve. But the ultimate outcome remains unaltered with the equilibrium output staying fixed at Y* though the equilibrium price level rise from P0 to P’. Initially, a shift in aggregate demand curve creates a pressure upon the equilibrium output inducing a shift in equilibrium point from E to E†. But such a pressure cannot be

Westfield shopping centre London development project Essay

Westfield shopping centre London development project - Essay Example This paper is intended to identify and map out the key actors for each phase of Westfield Shopping Centre London Development Project, from its inception to the final use, as well as to describe and analyse the process of value generation and its distribution between the public and private sector. The paper also identifies the risks each of the main actors took within the project and the returns they get back for taking on those risks. Introduction Wilkinson and Reed (2008, p.) define the property development as â€Å"a process that involves changing or intensifying the use of land to produce buildings for occupation†. On the one hand the property development include not only the land/property itself, e.g. buying or selling it for a profit, but also the infrastructure, building materials, labour, finance, etc., which further determines the process as complex, lengthy and high-risk activity often involving large sums of money and providing a relatively illiquid product (Wilkinso n and Reed, 2008, p.2, 27). On the other hand, this activity does not exist apart from the wider economic and social contexts, whether at local or national levels; therefore, the market (in the case of market-driven economies) directly influences the process of property development. Like all market-driven activities, the property development appears an end product of the demand and supply imbalances generated in the user and investor’s sides of the market respectively; and is also subjected to different interests originating amongst various actors which are unequally represented in terms of whether financial, aesthetic, emotional, social, etc. profit or loss (D’Arcy and Keogh in Guy and Henneberry, eds., 2002, p.19). According to Wilkinson and Reed (2008, p.3) the development process could be divided into several not entirely sequential, often overlapping and repeating stages – initiation, evaluation, acquisition, design and costing, permissions, commitment, imp lementation, and final use – let/manage/dispose; and a variety of important actors appear either within each stage of the process or across some/all of them, as follows: public sector and government agencies, planners (planning authorities), financial institutions, building contractors, professional team, and objectors (Wilkinson and Reed, 2008, pp.13-27). Though these actors are likely to have different perspectives and expectations, they contribute to the outcome of the property development process. The property development process itself, despite its complexity, displays the general characteristics of any other industrial production process - a combination of various inputs in order to achieve an output or product; but there are two features that make it very different – the unique end product (either in terms of physical characteristics or location) and the constant public attention focused on it, from the first to the last stage (Wilkinson and Reed, 2008, p.2). Th e Brief Westfield London Shopping Centre is a mega mall situated in Shepherd’s Bush – London Borough of Hammersmith and Fulham, which provides 130  803 sq m (1  408  000 sq ft) of retail and leisure accommodation, being home to over 265 shops on five levels, 50 restaurants and cafes, as well as cinema, and car parks for 4  500 cars. The development project has involved regenerating over 44 acres of brownfield site, 9 separate rail projects including the rebuilding/relocation of an operational depot facility for London Underground’s Central Line, together with major road works and construction of three railway stations – two on London’s underground network and one on its over ground network. The project included redevelopment of two Dimco Buildings – Grade 2 listed structures built in 1898 and adjacent to the main construction site, a revamp of Shepherd’s Bush Green and new affordable housing schemes funded by Westfield Develop ment (BBC News, 2009; Savills UK, n.d.). Main phases and actors The development scheme was being