matthias, james, jain & arisa on government policies
TRANSCRIPT
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Government Policies
Matthias, James, Jain and Arisa
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Monetary PolicyI loan capital
to the Commercial
Banks!
Central Bank
I want to make as
much money as possible!
Commercial Bank
LOANS
INTEREST
Households
Firms I want to invest!
INTEREST
DEPOSITS
LOANS
INTEREST5%
7%
4%
10%
8%
14%
2.5%
2%
3.5%
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Fiscal Policy
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Expansionary
Stimulus to Aggregate demand
Increase government spending
Decrease taxes
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Contractionary
Drag on Aggregate Demand
Decrease government spending
Increase taxes
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Supply Side Policy
Government attempts to increase productivity and shift AS to the right
Developed during 1980’s; monetarist/neoclassical era
Aim: to ‘liberate’ markets from forms of market ‘impurities’
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Labour
increase labour mobility in terms of geography location, industry and ‘time between jobs’
by increasing employees in firms to accept jobs
Basic ideal: increase supply and quality of labour while developing mechanisms for efficient labour markets
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Methods:
Alter labour laws
Reduce/abolish regional support schemes
Re-examine education and retraining schemes
Cut back social welfare unemployment benefits
Reduce union power
Abolish minimum wages
Decrease marginal tax rates of income
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Capital
Aim: To increase the quality and the quantity of capital
Methods: -Tax breaks/deduction to firms
-Lower taxes on dividends
-Lower corporate profit taxes
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Competition
Key factor to increase AS:
Competition Methods:
-Privasation of government-run business and deregulation of markets-Grant subsidies/tax reductions-Grant tax relief beneficial funding schemes for new firms-Reduce import tarrifs free trade/capital flows
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Recent Trends:USA
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Recent Trends: Germany
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Sources
http://welkerswikinomics.wetpaint.com/page/Problems,+Criticisms,+and+Complications?t=anon
http://www.docstoc.com/docs/21451487/Pros-and-Cons-of-Fiscal-Policy-vs
http://www.youtube.com/watch?v=1qhJPqyJRo8
http://www.economicshelp.org/macroeconomics/economic-growth/supply-side-policies.html