https://padlet.com/LimLynNa/16A101DM Explain the factors that may affect governments' decision on whether to implement pump-priming to counter a recession. en-us 2017-02-24 09:30:39 UTC 2017-03-09 06:29:27 UTC hello@padlet.com https://padlet.com/LimLynNa/16A101DM/wish/156213651 [Consider if there are any other neg consequences of increasing govt deficit / debt (eg. loss of investor confidence.]
 [So? Address the question: How does crowding out effect affect the government's decision to conduct pump priming?]]]> 2017-02-25 23:41:56 UTC https://padlet.com/LimLynNa/16A101DM/wish/156213651 https://padlet.com/LimLynNa/16A101DM/wish/156675981 Pump priming may have an unintended effect in the form of crowding out effect. If the increase in government spending is financed by borrowing, it will be competing with private sectors for funds. Increase in demand for funds creates upward pressure on interest rate. Higher interest means higher cost of borrowing, discouraging firms from investing, which in turn reduces investment (I) and individuals from buying on credit, reducing consumption expenditure (C) [Explain clearly why Cd and I fall] . In such cases, the fall in C and I may offset the rise in government expenditure => AD does not increase at all. Hence, pumping priming may not be effective in such cases.
 [So? How does crowding out effect affect the government's decision to conduct pump priming?]

]]> 2017-02-28 11:50:04 UTC https://padlet.com/LimLynNa/16A101DM/wish/156675981 https://padlet.com/LimLynNa/16A101DM/wish/156721138 Governments take into account the nature of their economy when deciding to implement pump-priming to counter a recession. 
Relatively small & open economy --> ER policy may be more effective [why?]
Relatively large & less open economy --> lowering taxes (FP) or i/r (MP) may be more effective. [why?] 
[Link to ADAS analysis, multiplier effect on national income.
Address the Question]
[EV: SR vs LR impact on economy?]


]]> 2017-02-28 14:20:55 UTC https://padlet.com/LimLynNa/16A101DM/wish/156721138 https://padlet.com/LimLynNa/16A101DM/wish/156928706
Approriateness of FP (ie increase G)
- root cause of problem
-intended/unintended consequences
- gov budget ]]> 2017-03-01 05:52:20 UTC https://padlet.com/LimLynNa/16A101DM/wish/156928706 https://padlet.com/LimLynNa/16A101DM/wish/156967668 Pump priming is an expansionary fiscal policy, where in times of recession, the government increases spending to increase AD and real output of the country. 

In order for a government to decide if this policy is the best option in times of recession, the government must consider that this policy's immediate effect is that of a short term duration and must consider the severity of recession and it's duration. [ link to negative consequences of a severe recession] The nature of economy of the country must also be considered as this policy will have varied effects on different economies [explain wrt egs] .

]]> 2017-03-01 10:24:24 UTC https://padlet.com/LimLynNa/16A101DM/wish/156967668 https://padlet.com/LimLynNa/16A101DM/wish/157005334 severity of the problem
severe recession caused by a sharp decrease in AD (rise in interest rates) and/or a sharp decrease in AS(fall in quality and quantity of labour)-->[negative effects of severe recession?] gov might want to pump prime as it is the most direct method of stimulating an income. In contrast, other policies which the gov might implement will definitely risk the effects of a longer time lag. For example, if the government decides to reduce PIT in hopes of increasing Cd, the effect will be delayed [consider MP instead? More obvious time lag. taxes are still part of FP] . This is because even though  consumers have higher disposable income, they will still take some time to decide if they should consume more during a recession. If consumers do decide to consume more, it would take a long time for the increase in Cd to be significant enough to result in an increase in AD

[consider extent of problem depends on  root cause, severity, duration?]]]> 2017-03-01 13:43:42 UTC https://padlet.com/LimLynNa/16A101DM/wish/157005334 https://padlet.com/LimLynNa/16A101DM/wish/157025944 Size of Multiplier is a determinant that drive the government's decision to implement an expansionary fiscal policy. 
The larger the multiplier size, the greater the effectiveness of FP in increasing AD ( real OP ) and thus greater increase in national income. 
This is because with each round, a larger proportion of additional income created is returned to the inner flow as Cd, generating additional streams of income and expenditure in every round of circular flow. 
However the size of k might be difficult to predict because mpc and mpw might change [explain why]. 
A country with a larger k size due to a larger MPCd will see a greater increase in NI given the same increase in aggregate expenditure and fiscal policy might be more effective in these countries. 
Thus, in the context of Singapore, pump pricing might not be the most effective measure as SG has a small fiscal multiplier due to a high marginal propensity to import [explain why] and save and a low marginal tax rate [explain why]. ]]> 2017-03-01 14:34:25 UTC https://padlet.com/LimLynNa/16A101DM/wish/157025944 https://padlet.com/LimLynNa/16A101DM/wish/157753442 Time lags -> To increase government spending will take time. It could take several months for a government decision to filter through into the economy and actually affect AD. By then it may be too late.

Poor information -> The government may have poor information about the state of economy and struggle to have the best information about what the economy needs.

Bond yields -> If there is concern over the state of government finances , the government may not be able to borrow to finance fiscal policy. 

]]> 2017-03-04 00:11:03 UTC https://padlet.com/LimLynNa/16A101DM/wish/157753442 https://padlet.com/LimLynNa/16A101DM/wish/157756163 Pump priming is the act of government spending into an economy to increase purchasing powers of consumers, which will in turn stimulate demand and boost private sector investment. 

A factor that will affect a government's decision on whether to implement it is the possible risk of inflation or worsened balance of payment. After a pump priming policy is implemented, AD will increase due to the resultant higher purchasing powers of consumers. However if AD increases at a fast rate and becomes persistently higher than AS, demand-pull inflation will occur as a result. This will in turn raise domestic price levels, cause exports to become more expensive and even erode export competitiveness, which will in turn worsen the economy in the country.]]> 2017-03-04 02:06:09 UTC https://padlet.com/LimLynNa/16A101DM/wish/157756163 https://padlet.com/LimLynNa/16A101DM/wish/157785319 Pump priming refers to the act of stimulating an economy, usually during a recessionary period, through increasing government expenditure and/or reducing taxation in order to increase AD.

One factor that would affect a government's decision to implement pump priming (or not) would be time lags. Assuming there are long decision time lags prior to implementing pump priming, reducing fluctuations would be far less successful, and this may also cause the fiscal policy to destabilise the economy instead. Unless the economy has already recovered and is experiencing a boom, pump priming may simply worsen the problems of overheating and thus, is inappropriate/ineffective in curing a recession. 

On the other hand, pump priming may also unintendedly cause demand-pull inflation due to the excessive increases in AD when the economy is at or near full employment of all resources. As the excess demand cannot be met, this will bid up prices of real output, causing demand-pull inflation. A persistent rise in AD will generate a sustained rise in the GPL -> inflation (explain how inflation leads to rise in M and fall in X). As the use of pump priming may mean that economic growth is achieved at the cost of inflation and a worsened balance of payments position, this may discourage the government to implement pump priming.

]]> 2017-03-04 15:34:56 UTC https://padlet.com/LimLynNa/16A101DM/wish/157785319