In his opinion, state should increase the aggregate demand by applying some fiscal and monetary policies. Decline in demand will naturally reduce the flow of resources to service and production of goods, which may damage employment and increase inflation. Natural changes in the prices, wages and interest rates cannot solve the problems in the short run, then the harms which is occurred in the short run can give a rise to bigger devastation in the long run. Keynes clarified his pessimism for the future with these sentence ‘’In the long run, we are all dead’’ According to Keynes, the reasons of recession and unemployment are occasionally the measures that people take to avoid them. If households want to save more than firms ' investment desires, output and employment levels in the economy will decrease.
In the job market, the increase in minimum wage will cause a shortage, making it less profitable for companies to employ many workers. This will result in higher unemployment. In response to such criticisms, the government has come up with a concept called the “voluntary living wage,” which is an “attempt to encourage firms to pay higher wages” (Economics Help). A living wage is an “hourly wage rate considered the minimum level to provide the essentials of modern living” (Pettinger, 2012). To put it into simpler words, a living wage is an adjusted type of wage that takes into account the average price level of the country.
Common knowledge here, but during the great depression it was Theodore Roosevelt who brought America out of the great depression. He as president and his chamber of people created plenty of jobs to fuel the economy again. Therefore, government should be able to step in and stop inflation on food and oil, because if they don’t than businesses will take advantage of the people. Since businesses know that people will have to buy food and oil as a necessity to live and survive on, people will have to buy it at any cost. This means more profit for businesses because the rise on food and oil means more money in their wallet but less money in consumers’ wallets, “Similarly, when homeowners benefit from inflation because the price of their homes rises, while renters suffer because they are paying higher rent” (ch.8 p. 15).
As opposed to economical benefit, there are many limitations. One may be that the government loses great power status with a declining population. With a bigger economy, governments are able to have bigger armies, bigger production, etc. Having less people and more emigrants leaving their country, it is difficult to do so for many governments, including Germany itself. With a declining population, the government’s economy will, too, decline due to the little occupations/participations, low amount of taxes, henceforth increasing the taxes for each individuals (however, mentioned previously, this may be a better solution).
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.
This curve became widely used by policymakers to control unemployment and inflation by manipulating the opposite variable. Acknowledging the inverse relationship between inflation and unemployment shown in the Phillips Curve, Phelps agreed that inflation depends on unemployment and vice-versa, but he challenged the curve's theoretical foundation and argued that the government should not use the curve as a basis for policy. He noted that when the government attempts to lower unemployment below its natural rate through expansionary monetary or fiscal policy, demand increases and firms respond by raising prices faster than anticipated by workers. With higher prices, firms receive a higher revenue and are able to hire more workers. When workers see that their wages have risen, they supply more labor, leading to a lower unemployment rate.
Diocletian also tried to bring up the economy, he set the highest price of goods and wages to try to prevent them from going higher. He ordered people to work at the same job until they died to boost up the productivity. He also made officials personally responsible for taxes. Even though these reforms could have made Rome a stronger empire it never worked because people refused to listen to the laws and Diocletian didn 't have the power to enforce them.
Lastly, the government made tariffs even higher amidst everything else that was already going on! A hands off government doesn’t help much during a depression in the way of saving us. The first fall in the market we were saved by large firms like J.P Morgan. However, the second time no one helped break us out of the crash, causing a The Great Depression. Our government today uses deficit spending to save us in case of another crash, but that wasn’t the case back
The issue of population growth and over population that was most challenging to me was the lack of solutions to the issue. The world population and its growth are not sustainable, I understand that there are ways to control population, such as birth control, education and a head tax. However, I question how realistic population control is and how effective can it be. For instance, the suggestion that development may reduce overpopulation seems to be counterproductive, as development also increases environmental degradation. Similarly, as the article we read for the first week of class states education helps reduce overpopulation but the more educated the society, the higher the incomes, the more resources they consume (McKeown, 10).
This is consistent with findings by International Monetary Fund (IMF) and World Bank, which have tended to support the notion that globalisation tend to lead developing countries towards increasing growth and hence income equality (IMF, 2000; World Bank, 2010). The theory of comparative advantage further suggests that with poorer countries producing goods requiring large amounts of unskilled labour, there should be an increase in demand for these unskilled workers, resulting in wage boosts for them. On the other hand, their skilled counterparts in these countries would not be that coveted, and hence, their wages would increase less or remain unchanged. For instance, in recent decades, some countries have substantially transformed themselves from economic backwardness to engines of economic growth and prosperity (Elmawazini & Nwankwo, 2013). This is due to the technological boom in the 20th century and the rise in globalisation, causing a tremendous rise in world output, as well as a shift in the geographical areas in which production takes place, hence prompting theories to suggest that inequality should fall as a result of this global
Like an investment, the government puts money into society, hoping to get a more substantial amount of money back. But with unemployment low the government is investing money into society and the investments are not paying off. The unemployed (7.8 million people) can’t or won’t pay and middle class doesn’t make an effective salary. If a significant amount of people are not working that means the government is missing out on vital income tax. And the middle class alone can’t fight off the $19.3 trillion dollars of debt.
As well, there is a huge potential of causing small business to collapse due to higher wages and being unable to afford it. Machines would replace humans. The impact would be massive to the economy. This is why the minimum wage should not increase. The raise of the minimum wage will increase the unemployment rate.
Since this causes a high unemployment rate many of the people will get on a government welfare program to pay for their family and that is even more money being lost in the economy, making the nation fall into a deeper recession. In addition, the economy will not do so great in the near future if the government does not clean up its act and fix the problems that are going on; such as the national debt and how it can be causing a recession in the United States. With the contributing factors of how the taxes should be taken care of, certain healthcare programs draining the little money the government has to offer, government welfare programs not being more supervised by not allowing people to take advantage of it, and lastly not allowing the government to borrow so much money from foreign countries to make our debt rise to the
Hoover was not wrong in saying people just needed to work harder. What he was wrong about is how jobs would be created in order to spur economic growth. The lack of government spending contributed to an even larger economic collapse. Austerity under current thought would cause a widening gap of wealth. Germany will
I do not support raising the minimum wage, and the reason is as followed. When the minimum wage is raised, workers are priced out of the market and many of them lose their jobs. The U.S should not raise the minimum wage because there would be a major loss in jobs which would be very hard for the unemployed to maintain their