Austerity policy is not good in the current situation, because it could cause revolution, increasing unemployment, decreasing GDP,export and government cannot afford money on education, so poor people became not to be able to go to school. I think austerity policy is for when country is in a good time, not recession. (Pettinger, 2013). Stimulus policy is much better than austerity policy though there is some problem. It leads to increase GDP, inflation, economic growth and decrease unemployment.
DISADVANTAGES Long term financial development puts an awful effect on the inhabitants of any nation. Long term economic developments may be identified with expansion, as inflations may increase. Inflations usually increase the cost of products on sale, and as the costs are higher, it will be an issue to the nationality in question to be able to buy their needs There is a limited amount of time involved in the growth of an economy as it involves an increase in GDP. The hypothesis and practice are both diverse. The hypothesis is the thing that economists are able to figure out for themselves; however, to be able to use the hypothesis in reality is the main task.
If that point wasn’t already clear, the strongest argument that is pro-raising minimum wage is that, someone who gets paid more money, in turn, has more money. In other words, people who think the minimum wage should be raised, would argue that raising minimum wage would decrease poverty. While this argument certainly makes sense when it isn’t thought about too much, it is an argument that is very easily disproved. The first way this argument is disproven, is when inflation is taken into account. Inflation occurs when the buying power of a dollar decreases.
Consider the economy enters a recession, thus the government automatically moves into a budget deficit. In order to balance this deficit, the government would have to raise taxes or cut spending, but both of these actions would reduce aggregate demand, making the recession worse. Now assume GDP increases above its potential level, the budget is automatically moved into surplus. To eliminate this surplus, the government would have to cut taxes or increase spending. These actions would increase aggregate demand, thereby pushing GDP even further beyond potential GDP and increase the risk of higher inflation.
When workers see that their wages have risen, they supply more labor, leading to a lower unemployment rate. Workers may not realize immediately that their purchasing power has fallen due to quickly rising prices, but over time, their expectations and understanding changes and they begin to supply less labor, thus resulting in the natural rate of unemployment and high inflation. Phelps illustrates this phenomenon in his expectations-augmented Phillips Curve. His contributions have better explained the relationship between unemployment
Argument Analysis Pro #2: Increased Availability of Jobs Argument Going along with the positive economic growth is the idea that if minimum wage is increased, and these workers turn around and spend this additional income, sales will increase to the point that businesses will need to employ extra workers. In other words, increasing the wages for minimum wage positions will create more minimum wage
As before, as the population increases with immigration, the labor supply would also increase, but the increased population would also lead to increased consumer spending and demand (i.e. money flowing into the US economy). When this new shift is taken into consideration, the labor demand would need to also increase to accommodate the new consumer demand. Thus, the change to wage rates would be subject how much labor supply and labor demand shift; a larger shift in supply over demand leading to decreased wage rates and vice-versa. Consequently, the resulting outcomes from immigration could be positive, negative, or neutral towards economic factors.
The model eliminated the Glass-Steagall legislation, which prevented large firms from making risky financial investments. Deregulation is the key to runaway equality and deregulation allowed it to happen (Leopold, p. 35). Lastly, reducing government social spending eliminated many safety net programs that aided and protected workers and families during tough economic times. The cutting of safety net programs does the exact opposite of what the Better Business Climate model promised. The model is supposed to bring renewed prosperity to the United States but it brought more inequality and stripped safety net programs that actually helped most Americans.
Rational expectations theory also leads to the conclusion that, although the government can help reduce the unemployment rate, their actions will only lead to higher prices. Since unemployment is basically at equilibrium most of the time, any actions by the government to alter its level will unnaturally disrupt the economy's price level. Therefore, the government should not
First the Keynesian stabilization policies for economics that centers around changing economic direction in respect to the status of the economy. Keynesian theory includes aspect of increasing deficits and implementing tax cuts in a recession to generate revenues and employment; but, in times of economic booms implement higher taxes and reduce deficits to help stabilize the economy. This would allow the economy to work towards growth and low unemployment. Thus, the shift to the Keynesian model of economics occurred in the 1940’s because of the promises of achieving the goals of a growing economy and low unemployment rate. Therefore, a balanced budget would hinder these objectives because it would go against having deficits and adding to the growing National
The trickle down effect explains that if that if higher-income earners get an increase in disposable income, they will thus increase their spending, creating additional demand in the economy. On the other hand, increased profits for firms may be reinvested into expanding output. According to political analyst Thomas Woods, increasing the size of government along Nordic Model lines is not the solution to the recent growth in inequality rates across the OECD. Imposing more government control over the economy, particularly those with large bureaucracies and oppressive laws, will have a detrimental effect on economic growth and cause poverty to increase. Governments should make it much easier for businesses to create jobs by getting rid
After a few years, President Reagan’s economic plan started to work, and America entered “one of the longest periods of sustained economic growth since World War II” (America History). Under the Reagan Administration; those that benefited the most were often the upper class citizens; specifically, due to the tax exemptions. The more money a person made, the less taxes were imposed in order to promote saving and investment. Unfortunately, the middle working class was often burdened with the residual tax deficit; forcing working class to work more hours to make more money (American History). Some critics would even say that although Reagan’s policies were designed to reduce unemployment and poverty level; they made very little effort in regards to either one.