https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8 DP 2 Economics en-us 2021-09-01 15:00:46 UTC 2021-09-01 18:56:49 UTC hello@padlet.com khanshakerasikander https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710139218 2021-09-01 15:01:34 UTC https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710139218 khanshakerasikander https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710141056 government affects the money supply by changing interest rates]]> 2021-09-01 15:02:07 UTC https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710141056 khanshakerasikander https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710180911 when the government directly increases the productive capacity of the economy by intervening]]> 2021-09-01 15:17:40 UTC https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710180911 khanshakerasikander https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710211957 government changes taxes to get revenue and their expenditure]]> 2021-09-01 15:29:38 UTC https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710211957 khanshakerasikander https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710249755 2021-09-01 15:44:24 UTC https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710249755 khanshakerasikander https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710262735 -will not be influenced/ manipulated by political pressure as the central bank is solely responsible and the government not a part of it
-the interest rate can be shifted accordingly, so it's more flexible
-can be implemented faster
-no budget deficits and debt needed
-does not crowd-out

]]> 2021-09-01 15:49:15 UTC https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710262735 khanshakerasikander https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710263089 -works well in an inflationary gap, but in a recessionary gap since banks may not want to lend money even if the interest rate falls to very low levels, firms'/consumers' confidence becomes low, so they do not want to borrow, and the interest rates can not in any way fall further than 0.
-can create conflicts in the government objectives since the foreign sector will be affected.
-could lead to inflation if aggregate demand increases too much
-may not be able to deal with stagflation]]> 2021-09-01 15:49:23 UTC https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710263089 khanshakerasikander https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710267443 -allows specific areas of the economy to be targeted
-can effectively pull out an economy from a deep recessionary gap using the expansionary policy
-can increase economic growth by increasing potential output
-aggregate demand is affected directly by government spending

]]> 2021-09-01 15:50:36 UTC https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710267443 khanshakerasikander https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710267902 -theres a long delay in implementation
-prone to political influence
-expansionary policy can cause inflation if it lasts for too long
-large budget deficits and debt can be expected from the expansionary policy
-cannot be incremental in nature
-can cause crowding out]]> 2021-09-01 15:50:48 UTC https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710267902 khanshakerasikander https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710281486 -works with the demand side of the economy
-they aim to stabilize the economy by reducing short term economic fluctuations such as inflationary and recessionary gaps, 
-lower the unemployment rate
-maintain a stable and low rate of inflation in the economy
-create external balance between exports and imports
-distribute income equitably in the economy]]> 2021-09-01 15:56:14 UTC https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710281486 khanshakerasikander https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710289994 -works with the supply side of the economy
-increases potential output by encouraging long term economic growth
-increases market responsiveness to changes in demand and makes production more efficient
-works on a greater labor market flexibility, so that labor costs decrease as well as unemployment
-incentivizes firms to invest more and lower production costs
- lowers rate of inflation so that global competitiveness is achieved

]]> 2021-09-01 15:59:53 UTC https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710289994 khanshakerasikander https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710351946 -supports the areas in an economy that needs growth directly
- reduces unemployment by creating new jobs
-reduces chances of inflation
-the economy grows and potential output increases
-equitable distribution of income is achieved]]> 2021-09-01 16:26:36 UTC https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710351946 khanshakerasikander https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710352533 -theres a long time delay in taking effect
-opportunity costs involved while making decisions regarding government spending
-may lead to budget deficit and debt
-may increase the member pool of the government and lead to inefficiency
-may cause inefficient allocation of resources according to prioritization

]]> 2021-09-01 16:26:50 UTC https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710352533 khanshakerasikander https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710375968 Expansionary monetary policy:
central bank increases money supply in a recessionary gap --> money curve shifts rightwards --> since demand of money doesn't change, the interest rate falls --> people borrow, spend and invest more --> aggregate demand (AD) increases

both keynesian and monetarist policies predict this to increase GDP, however the size of the increase is greater in the Keynesian curve as the SRAS slope in steeper.


Contractionary monetary policy:
central bank decreases money supply in an inflationary gap --> money curve shifts leftwards --> since demand of money doesn't change, the interest rate increases --> people borrow, spend and invest less --> aggregate demand (AD) decreases

in the Keynesian model, there may be a huge decrease in real GDP and a small decrease in the price level or no change at all because of the slope, as opposed to the decrease in real GDP in the monetarist model]]> 2021-09-01 16:36:56 UTC https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710375968 khanshakerasikander https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710474882 Expansionary fiscal policy in the recessionary gap:
-government spending increases --> aggregate demand (AD) increases
-government decreases taxes:
                 -personal taxes are cut --> disposable income increases --> consumer spending increases --> aggregate demand (AD) increases
                 -business taxes are cut --> profits increase --> they invest more --> aggregate demand (AD) increases

There will be a smaller increase in real GDP and greater increase in price level in the Keynesian model in the non-horizontal range, which is similar to the increase in real GDP in the monetarist model. There is a larger fall in real GDP in the horizontal range of the Keynesian model though.


Contractionary fiscal policy in the inflationary gap:
-government spending decreases --> aggregate demand (AD) decreases
-government increases taxes:
                 -personal taxes are increased --> disposable income decreases --> consumer spending decreases --> aggregate demand (AD) decreases
                 -business taxes are cut --> profits decrease --> they invest less --> aggregate demand (AD) decreases

In the monetarist model, real GDP decreases and price levels decrease as well, similarly to the upward-sloping range of the Keynesian curve. However, in the horizontal range, the price level stays constant.]]> 2021-09-01 17:20:32 UTC https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710474882 khanshakerasikander https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710514224 -Privatization:
         -firms may sell at higher prices and lower quantities which does not favor public interest
         -may increase unemployment as they fire workers, leading to inequitable distribution of income
         -the environment may be negatively affected as firms use more cost-efficient non-renewable resources for energy and waste management

-Deregulation:
         -may increase unemployment as they fire workers, leading to inequitable distribution of income
         -may not favor public interest

-trade liberalization: less efficient firms may go out of business and increase unemployment

-contracting out to private sectors:  less efficient firms may go out of business and increase unemployment

]]> 2021-09-01 17:37:56 UTC https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710514224 khanshakerasikander https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710542129 -Investing in human capital: investing more in training people, educating people, better healthcare services --> labor force becomes more productive --> economic growth and potential output increases --> aggregate demand (AD) increases

-Investing in policies: investing more to promote production in industries --> firms invest more --> economic growth and potential output increases --> aggregate demand (AD) increases

-Investing in technology: investing more into research and developing the physical capital --> better efficiency in production --> productivity grows --> economic growth and potential output increases --> aggregate demand (AD) increases

-Investing in infrastructure: investing more in infrastructures --> increases efficiency and productivity --> economic growth and potential output increases --> aggregate demand (AD) increases

]]> 2021-09-01 17:50:08 UTC https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710542129 khanshakerasikander https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710564845 2021-09-01 18:01:05 UTC https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710564845 khanshakerasikander https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710573223 -privatization: government transfers ownership to private companies --> profit is maximized --> improves efficiency --> product output increases

-deregulation: government stops/ lowers its regulation over industries --> domestic competition increases --> efficiency increases --> product output increases

-trade liberalization: government lowers foreign trading barriers --> increases competition among domestic and foreign products --> efficiency increases --> product output increases

-contracting out to private sectors: the government lends out contracts to private firms to increase production --> competition increases among domestic firms to get government contracts --> efficiency increases --> product output increases

-anti-monopoly legislation: government makes sure monopolies dont form as they are inefficient --> competition increases --> efficiency increases --> product output increases]]> 2021-09-01 18:05:10 UTC https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710573223 khanshakerasikander https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710606388 -abolishing minimum wages: unskilled workers get paid less --> firms' profits increase --> they invest more --> potential output increases

-weakening the power of labor/trade unions: trade unions cant negotiate higher wages --> labor costs fall --> production increases --> profits increase --> they invest more --> potential output increases

-reducing unemployment benefits: unemployed people are forced to find a job --> unemployment falls -->  potential output increases

-reducing job security: firms can fire workers easier and hire better people--> labor costs fall --> production increases --> profits increase --> they invest more --> potential output increases

]]> 2021-09-01 18:21:31 UTC https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710606388 khanshakerasikander https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710609990 -stabilizing the business cycle will get even harder if unemployment benefits are abolished

-may increase worker insecurity due to lower social protection

-may cause inequitable distribution of income and an increase in poverty as wages decrease

]]> 2021-09-01 18:23:23 UTC https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710609990 khanshakerasikander https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710622569 -lowering personal income taxes: people's after-tax income increases --> they wish to provide more work --> unemployment decreases --> LRAS curves shifts to the right --> potential output increases

-lowering taxes on capital gains and interest income: people will try to save more to invest further in financial investments --> more funding available --> potential output increases

-lowering business taxes: firms' after-tax income increases --> more funding is available to invest --> potential output increases]]> 2021-09-01 18:30:07 UTC https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710622569 khanshakerasikander https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710623385 -production is more efficient

-resources are allocated better

-unemployment decreases

-product quality improves

-increase in LRAS makes inflation unlikely

-overall economic qrowth, as potential output increases]]> 2021-09-01 18:30:35 UTC https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710623385 khanshakerasikander https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710623682 -may prove to be ineffective if people decide to relax more than work

-cuts in taxes may  cause a bigqer budqet deficit and debt 

-may make the distribution of income worse, since only  high income earners can pay these

]]> 2021-09-01 18:30:45 UTC https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710623682 khanshakerasikander https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710650144 theres a long delay in taking effect]]> 2021-09-01 18:44:23 UTC https://padlet.com/khanshakerasikander/fzg2i1lmj5uts9p8/wish/1710650144