Studied by 14 people
Looks like no one added any tags here yet for you.
Expansionary fiscal policy
Abenomics (2012-2018)
The Japanese government under Prime Minister Shinzo Abe aimed at stimulating economic growth and ending deflation.
These policies included increased government spending on infrastructure and education, as well as monetary policies such as quantitative easing.
Expansionary fiscal policy
European Union Recovery Plan (2020)
In response to the COVID-19 pandemic, the European Union implemented a recovery plan
€750 billion in funds to support member countries’ economic recoveries.
Significant spending on green initiatives, digital infrastructure, and social welfare programs.
Contractionary Fiscal Policy
Canadian federal government budget cuts (1995)
An effort to reduce the budget deficit and stabilize government finances
The Canadian government under Prime Minister Jean Chrétien implemented significant budget cuts across a range of government programs and services.
Expansionary Monetary Policy
Zero Interest rate policy (ZIRP) by the Bank of Japan (1999-2006)
In response to a prolonged period of deflation and economic stagnation
The Bank of Japan implemented a ZIRP that kept the policy rate at or near zero for several years, in an effort to stimulate borrowing and investment.
Contractionary Monetary Policy
Volcker Shock (1980-1982)
The Federal Reserve under Chairman Volcker raised the federal funds rate from around 11% in 1979 to a peak of 20% in 1981.
The central bank also implemented other measures to tighten monetary policy, such as increasing reserve requirements for banks.
Infrastructure spending
China has implemented a massive infrastructure spending over the past few decades
transformed country’s economy and improved its overall productivity
construction of:
new ports
railways
highways
energy pipelines
Unemployment (unemployment benefits)
US unemployment benefits
In response to the COVID-19 pandemic, the country’s government implemented several measures to expand unemployment benefits, including increasing the amount of benefits available and extending the duration of benefits.
As of February 2021, over 19 million Americans were receiving some form of unemployment benefits.
Unemployment (public works programs)
In response to the 2008 global financial crisis
Chinese government launched a stimulus program that included significant investment in infrastructure projects
created jobs and supported economic growth
Market-based SRAS (Deregulation)
U.S. Airline Deregulation Act of 1978 prevented prohibits states from regulating the price, route or service of an air carrier for the purposes of keeping national commercial air travel competitive. This had a positive impact on consumers as the fares for travel were decreased and inter firm competition increased.
Vocational training programs, wage subsidies, unemployment benefits
The country also provides unemployment benefits and has implemented public works programs to create jobs.
In response to the COVID-19 pandemic
Spanish government implemented a range of fiscal measures to support the economy, including direct aid to businesses and households, and investment in health care and social services.
As of November 2021, the unemployment rate in Spain was 14.8%.
Tax cuts
US Tax Cuts and Jobs Act of 2017
lowered corporate tax rate from 35% to 21%
Vocational training system
Germany implemented a vocational training system
combines classroom education with on-the-job training
in 2020 the youth unemployment rate in Germany was 5.8%, compared to the Euro area average of 15.4%
Expansionary fiscal policy
The American Recovery and Reinvestment Act (2009):
Obama’s economic stimulus package ended the recession following the 2008 financial crisis.
Cut taxes by 288 billion dollars
Spent 224 billion on unemployment benefits, healthcare, and education.
Spent 275 billion on federal contracts to create jobs.
Strength and weakness of The American Recovery and Reinvestment Act (2009)
increased unemployment benefits, increasing economic well-being and consumer confidence
Higher AD causes demand-pull inflation and decreases purchasing power, higher government spending increases government debt
Contractionary Fiscal Policy
Tax Reform Act (1993):
US lowering government debt.
In the 90s Bill Clinton raised personal income taxes from 28% to 36% for high-income earners.
Corporate income tax also increased from 34% to 35%. The increased taxable part of social security benefits.
Imposed a 4.3% tax per gallon on fuel.
Strength and weakness of the Tax Reform Act (1993)
taxation on fuel is good for sustainability as there will be less driving, better for the environment
leads to higher income tax so the net income decreases, consumption decreased because of the income tax leading to AD decreasing
Expansionary Monetary Policy
Financial Crisis China (2008):
After the Great Recession, the People’s Bank of China reduced the minimum reserve ratio required of commercial banks (the proportion of a bank’s total reserves that must be allocated towards liquid assets).
as well as a series of interest cuts
Allowing them to lend more money and inject more into the economy.
Stimulate lending and investment.
Strength and weakness of the Financial Crisis China
Strength: Stimulates economic growth, By reducing the minimum reserve ratio, the People's Bank of China encourages commercial banks to lend more money.
Weakness: If the increased money supply exceeds the growth of goods and services in the economy, it may lead to inflationary pressures.
Contractionary Monetary Policy / Inflation
Due Russia's excessive government spending into its war with Ukraine, the Russian Central Bank hiked interest rates to 13% to prevent the economy from overheating.
Other factors such as rising wages and rising commodity prices were also causing inflation.
Due to the majority of the injections into the economy coming from gvt. spending into the war, the interest rates are not very effective.
Strength and Weakeness of Russia’s increase in interest rate
Strength:
Weakness:The war has caused mass mobilization and emigration, thus creating huge labor shortages across the country. Unemployment is so low that entering unemployed individuals into the workforce is not enough to solve the issue. Wages have increased 13%. Prices of commodities such as fruits and vegetables are rising as well. GDP is expected to expand by only 1% next year. 3% unemployment rate
Progressive income tax
Sweden has a progressive income tax system that places a higher tax burden on those with higher incomes. In 2021, the top marginal income tax rate in Sweden was 57.2%. Sweden is currently ranked as one of the top countries in terms of equality.
Strength and weakness of progressive tax
Strength: Progressive taxation can help alleviate poverty by redistributing wealth and funding programs that support low-income individuals and families. This contributes to a higher standard of living for a broader segment of the population.
Weakness: Critics argue that high marginal tax rates can create disincentives for individuals to work, invest, or take risks, as they may perceive that a significant portion of their additional income will be taxed at higher rates.
shifts AD left
Inequality/ Unemployment (Education)
Chile has implemented a range of education subsidies to help make education more accessible to low-income families. For example, the country’s Beca Indígena program provides scholarships to indigenous students to help cover the costs of education.
Strength and weakness education
Strength: Targeted subsidies like the Beca Indígena program specifically address educational disparities by providing financial support to indigenous students. This helps bridge the gap in educational attainment between different socio-economic groups, contributing to a more equitable society.
Weakness: Implementing and managing subsidy programs can be administratively complex. Ensuring that the subsidies reach the intended recipients and are used effectively may require a lot of administrative infrastructure. Quality of education is equally important. Subsidies alone may not address issues related to the quality of education, which could affect the long-term impact on reducing inequality.
shifts SRAS right
Inequality/ Unemployment (Universal Basic income)
Finland has implemented a universal basic income pilot program to test the idea of providing a basic income to all citizens, regardless of their income or employment status. The pilot program provided 560 euros per month to a group of randomly selected participants for two years.
Strength and weakness Universal Basic income
Strength: Since the basic income is unconditional, individuals may have more flexibility to pursue part-time work, education, or entrepreneurial ventures without the fear of losing their benefits. This can encourage a more dynamic and adaptable labor market.
Weakness: Implementing a universal basic income on a national scale can be expensive, potentially requiring substantial increases in tax revenue or diverting funds from other essential public services. The basic income program could lead to an increase in consumption without an increase in the production of goods and services. Meaning it could contribute to inflationary pressures.
Shifts AD right
Deflation
Japan has been experiencing periods of deflation since the late 1990s, due to the declining, aging population, strict immigration laws, and declining productivity growth. Japan is utilizing negative interest rates to make money available for cheaper, buying back bonds to increase money supply in the economy, and introducing new visas to allow blue-collar workers to emigrate to Japan
Strength and weakness deflation
Strength: Buying back bonds increases the money supply in the economy, making borrowing cheaper and boosting spending. This can help counter deflationary pressures by injecting liquidity into the financial system.
Weakness: The effectiveness of negative interest rates in stimulating spending is not guaranteed. Consumers and businesses might react differently, and negative interest rates may have unintended consequences, such as impacting banks' profitability and causing distortions in financial markets.
Inflation/High Economic Growth
India and China were amongst some of the highest countries in terms of GDP rankings. This has not always been the case in fact in 2000 China’s and India’s GDP were $1.21 trillion and $468.4 billion respectively. They have grown dramatically over the last years as can be seen from their current large GDPs.
Interventionist (SRAS) (Investment in education and training)
Beti Bachao Beti Padhao scheme designed to reduce gender inequality in India. Lower income families are paid by the government to send their daughters to school. Incentivizes them to continue her high school education. 50000 rupees paid over 18 years. Considering many families live below the poverty line, this is a substantial amount.
Interventionist (SRAS) (Reeducation programs)
Vocational training and apprenticeships are two common policy tools in the fight against youth unemployment. The World Bank invested $9 billion in 93 such training programs between 2002 and 2012. Subsidizing vocational training can help poor workers overcome a lack of financial resources that might prevent them from acquiring valuable skills. However, the success of vocational training relies on workers being able to find firms that can hire them.
Market-based SRAS (Deregulation)
U.S. Airline Deregulation Act of 1978 prevented prohibits states from regulating the price, route or service of an air carrier for the purposes of keeping national commercial air travel competitive. This had a positive impact on consumers as the fares for travel were decreased and inter firm competition increased.
Market-based SRAS (Reduction of unemployment benefits)
The US congress decided not to extend federal unemployment benefits at the end of 2013, which means unemployment benefits would end for 1.3 million people. This forced them to find a job, even if it was low paying
Strength and weakness Reduction of unemployment benefits
Strength: Cutting off unemployment benefits can reduce dependency on government assistance and encourage self-sufficiency. Individuals might be motivated to take any available job, gain experience, and gradually move up the career ladder.
Weakness:Ending unemployment benefits without addressing the underlying issues in the job market, such as the availability of well-paying jobs, can contribute to increased poverty and income inequality. Individuals forced into low-paying jobs may struggle to make ends meet, exacerbating social and economic disparities.
Shifts LRAS right
Market-based SRAS (privatisation)
After the Soviet Union collapsed, the Kazakh state government still owned all of the country’s firms. The government then implemented a huge privatization program that allowed its citizens to have a stake in the national companies. Large companies extracting and refining oil such as KazMunayGas and Samruk Energy, along with railway companies such as Temir Zholy and Kazakhstan’s principal airline carrier Air Astana were all privatized.
Strength and weakness privatisation
Monetary policy to stimulate unemployment
in response to the COVID-19 pandemic
Reserve Bank of Australia lowered interest rates and increase the availability of credit
supported demand and stimulated job creation
as on December 2021, the unemployment rate in Australia was 4.2%
Conditional cash transfer programs
Brazil’s Bolsa Família program provides conditional cash transfers to poor households to encourage children to attend school and receive healthcare.
The program has been credited with helping to reduce poverty and income inequality in the country.
Between 2001 and 2017, the proportion of the population living in poverty fell from 24.7% to 6.5%.
Minimum wage laws
In 2021, the minimum wage in the UK was £8.91 per hour for workers aged 23 and over.
The policy has helped to reduce income inequality in the country.
Education subsidies
Chile has implemented a range of education subsidies to help make education more accessible to low-income families.
Beca Indígena program provides scholarships to indigenous students to help cover the costs of education.
The policy has helped to reduce poverty and increase educational attainment in the country.
R&D
In 2022 the Netherlands funded the R&D sector 22 billion euros from both the government and firms as sources of the money
Economic growth in terms of standards of living
South Korea
growing rapidly since the 1980s with no signs of slowing down.
13th largest GDP in the world at more than $1.67 trillion in 2022.
Services and industrial sectors, while agriculture makes up a very small portion of the economy.
Diversification?
China is South Korea's largest trading partner, accounting for 22.8% of total exports in 2022, followed by the U.S., which accounted for 16.1%
High inflation
High unemployment
Use of tax to reduce inequality
