Macroeconomics and Policy

Inflation is defined as the increase in prices of general goods and services. If there is no inflation during a particular period, there will be no impact on cash flows. The money cash flow must be equal to real cash flow.

The Bretton Woods Conference, officially known as the United Nations Monetary and Financial Conference was a gathering of delegates from 44 nations that met from July 1 to 22 , 1944 in Bretton Woods, New Hampshire, to agree upon a series of new rule for the post-World War II international monetary system. It was associated with Establishment of World Bank and Establishment of IMF.

Other things remaining unchanged, when in a country the price of foreign currency rises, national income is likely to rise as it indicates that the greater flow of foreign exchange in the domestic economy promotes higher level of development. Hence, national income rises as the price of foreign currency rises.

The Triffin dilemma refers to the conflict of economic interests that arises for a country that issues the global reserve currency, identified by economist Robert Triffin.

The primary cause of the collapse was the US Treasury's inability to maintain the gold-dollar convertibility due to excessive dollar supply and gold outflows. While the US did eventually make the dollar inconvertible (Nixon Shock), the refusal to convert short-term liabilities was the core systemic issue.

Under the Smithsonian Agreement, the US dollar was devalued against gold by approximately 8.57 percent (from 35 dollars per ounce to 38 dollars per ounce).

Some of the reasons for capital flight are expected return on investment is higher abroad,unstable political and economic climate, fear of war, terrorism, etc. tax structure of local governments, high inflation in home country and attractiveness  of foreign financial system.

Depression is defined as a severe and prolonged recession. A recession is a situation of declining economic activity. Declining economic activity is characterized by falling output and employment levels. Generally, when an economy continues to suffer recession for two or more quarters, it is called depression.

When Herbert Hoover was elected as President in 1928, the U.S. economy appeared to be in a Period of prosperity.

 Mechanisation had reduced the need for labour. Production had expanded so rapidly during the war and post-war years that that there was a large surplus. Unsold stocks piled up, storehouses overflowed with grain, and vast amounts of corn and wheat were turned into animal feed. Wheat prices fell and export markets collapsed. This created the grounds for the Great Agrarian Depression of the 1930s that ruined wheat farmers everywhere.

In Keynesian economics, the precautionary motive for holding money is often modeled as a function of income (y).

The Great Depression was an economic crisis that occurred in the United States in the 1930s. It was the longest and most severe economic downturn in American history.

The Great Recession was an economic crisis that occurred in the United States in the 2008. It was the longest and most severe economic downturn since the Great Depression.

The American Recovery and Reinvestment Act was an economic policy that was implemented by President Barack Obama in response to the Great Recession. It consisted of a series of programs and reforms designed to stimulate the economy and provide relief to the unemployed.