Should the Government be Prepared to Increase Spending in Order to Eliminate Unemployment?
Should the Government be Prepared to Increase Spending in Order to Eliminate Unemployment? Government spending can be categorised in two ways: capital or current spending. Capital spending is spending which aims to create future long-term and long-lasting benefits. In the case of the Government, this can include improving infrastructure (roads, telecommunications equipment and so on) - these are things that allow or aid the production and sale of goods and services. Current spending is expenditure which aims to provide things which only last for a limited time. This can include increased wages or salaries. One of those types of spending is much more effective, when it comes to decreasing unemployment; capital spending can cause what is known as a 'multiplier effect'. Should the Government chose to invest in creating a much more efficient road or transport network, there is the opportunity of employment for those with the skills to allow this to happen (builders, engineers, surveyors, etc). The multiplying effect comes into play, when the long term effects of the investment are considered - a more efficient transport network will allow businesses to transport their products more efficiently. The increased efficiency means that the businesses are able to use the saved time/money elsewhere. This again, leads to more opportunity for employment. These newly employed workers
Discuss appropriate policy measures that the Singapore government may undertake to increase the net benefits of globalization
Discuss appropriate policy measures that the Singapore government may undertake to increase the net benefits of globalization To increase the net benefits of globalization, the negative impacts of globalization have to be mitigated and the positive impacts of globalization have to be enhanced at the same time. While Singapore may be handicapped by its small market size and lack of natural resources, it seems that these drawbacks could be less of a problem as the world economy becomes more globalised. However, it does not seem to be the case. Since Singapore government consistently restructures the economy to cope with the challenges of globalization, it hence resulted in structural unemployment. A remedy for structural unemployment is to use supply-side policy which is to provide education, retraining facilities and assistance to move the labour from depressed to expanding industries. This helps to raise the productivity of labour and hence raises the productive capacity. With a more educated workforce, the quality of labour could be raise too. However, the re-skilling and changing mindset of labour require increased government expenditure, therefore incurring opportunity cost. Firms may also reluctant to send workers for training if there were no subsidies or any financial support. There may be insufficient appropriate training facilities due to space constraint.
Reasons for unemployment and the main economic theories explaining it.
The unemployment is a common issue of macroeconomic policy. Unemployment is often debate on two difference views of economist has been considered known as Keynesian between Monetarist. Sunhee an ( Group M) The definition of unemployment described people who are able and willing to work at a prevailing wage but they are unable to find a job. To begin with, economists recognised the four key classes of unemployment discussed above - frictional, seasonal, cyclical and structural. In this essay, I will discuss how economists considered the main roots of unemployment as they are seeking different theories and will assess how two economist (Keynesian and Monetarists) approaches to the unemployment problem. Fundamentally, monetarist and Milton Friedman believed that the money supply is the most important component of economic growth and affects aggregate demand. Monetarist claims that there are various factors of unemployment. Firstly, monetarist believed that the unemployment arise due to excessive growth of the money supply leading to excess demand for goods and services. Assume that, if the price rises, the rate of demand will lead to higher price thus there may be a temporary (short run) rise in real output and low unemployment. However, it may be arises the expectation of higher prices and wages among the people. Besides, if products or services price rises, the demand
An Introduction to Aggregate Demand
Macroeconomics H/W 3 - An Introduction to Aggregate Demand The formula for AD is C + I + G + (X-M) a) C - Consumer expenditure - spending by households on consumer products (e.g. clothing, food and insurance). I - Investment - spending on capital goods. G - Government spending - spending by the central government and local government on goods and services. X - Exports - products sold abroad. M - Imports - products bought from abroad. (X-M) - Net exports - the value of exports minus the value of imports. b) Consumer expenditure, or consumption, is the largest component in most countries. It is basically spending by households on consumer goods and so tells us how much vaguely how much demand there is for these certain goods. Investment is similar, except capital goods are bought instead of consumer. It is the most volatile component of AD, as it may rise by 60% on year, but fall by 20% the next year. Government spending does not include transfer payments or job seeker's allowance as they do not involve the government itself buying goods and services.Net exports add foreigners' spending on the country's goods and services and deduct spending by the country's population on imports. This component can be positive or negative. c) 3 determinants of Consumption (C):- - Real Disposable Income: main influence on consumer expenditure. The rich tend to spend more than the
The costs of unemployment.
Index . Unemployment 2. Effects of unemployment * Effects on the individual * Effects on the society * Effects on the economy and the government 3. Bibliography The Cost of Unemployment By: Tshwanelo Ramekgwe Student number: 200914443 Unemployment Unemployment refers not only to people that have lost their jobs but also to people that have never been able to find employment to begin with. Unemployment afffects a lot of people both directly and indirectly. People rely on their income for a living and to maintain their standard of living. So when someone is unemployed it leads to a lot of emotional and finacial problems for the workers and their families. Some of the effects of unemployment include: > Effects on the individual > Effects on the society > Effects on the economy and the government Effects on the idividual Being employed gives people their sense of identity, especially their social identity, it provides a sense of purpose and the income provides a means of freedom and control outside the workplace. Unemployment therefore hits individuals the hardest,the jobless lose their self respect, purpose, sense of achievement and ofcourse income. It is not just the individuals themselves that are affected by this but their families too. Homes and cars are lost, arguments at home, even divorce rates have been shown to rise due to the fact that people cannot
What are the government objectives? Explain why each is important and how the government can achieve each objective.
Matthew Halpin 3 May, 2007 What are the government objectives? Explain why each is important and how the government can achieve each objective. The Government primary economic objective is to achieve economic stability. In order to achieve this economic stability the government focus on achieving four principle objectives. These objectives are; to achieve equilibrium in the balance of payments, to keep unemployment levels low, to keep inflation levels low and for overall growth of the economy to be achieved. The various tools that the government has to 'manipulate' the economy to achieve these objectives include; interest rates, the tax system, exchange rates and their own spending. I will begin by looking at the objective of keeping unemployment levels low. Firstly, what is unemployment? This is the problem encountered when there are people able and willing to work but are unable to find jobs. Any economy facing mass unemployment has a major economic and social problem on its hands; therefore making it one of a government's primary objectives to keep levels as low as possible. The economic problem lies in the fact that scarce factors of production are lying under-utilised and wasted. Consumers want goods and services; workers want to provide them; factories and workplaces are probably lying idle. Yet the economic system is unable to fully match up this desire
Compare the effectiveness of the fiscal and monetary policy with some reference to supply side policy in running the UK economy. Fiscal policy is used to change taxation and government spending in order to control the level
Economics Homework **Compare the effectiveness of the fiscal and monetary policy with some reference to supply side policy in running the UK economy. Fiscal policy is used to change taxation and government spending in order to control the level of aggregate demand, which can reflate or deflate the economy. Monetary policy is the control of money supply by changes in interest rates that affect bank lending, which then changes the level of AD. Fiscal policy is far more effective than the monetary policy as it can target many things, whereas the monetary policy is limited on its effectiveness. Fiscal policy can be very effective when used at the right time, such as in a deep recession, because fiscal policy can cause a multiplier effect which can create jobs quickly and it gives people a boost in confidence, which then increases spending and investments. Monetary policy isn't very effective when there is a recession, because even though it can create jobs but it still can't attack investments and it can cause inflation to increase if we are too close to Nairu. It's never ideal to just rely on just 1 policy, you have to use both together in order for the economy to run smoothly. If the fiscal policy is just used on its own then it may be overdone thus causing inflation to increase, these effects depend on whether or not we are close to Nairu. Too many injections from the
Fiscal and Monetary Policies
Fiscal and Monetary Policies Introduction Fiscal and monetary policies focus on quickly returning the economy to sustainable, healthy growth. Any type of fiscal relief package will boost consumer and business spending and can augment the nation's long-term growth potential. Expansionary monetary policy can stimulate growth and provide insurance against the possibility of deflation. Both fiscal and monetary policies affect aggregate demand. But because discretionary fiscal policy changes in the U.S. are often difficult to enact in a timely fashion, automatic fiscal stabilizers and discretionary monetary policies are commonly viewed as the primary policy tools for macroeconomic stabilization. However, there are situations in which monetary policy might be unable to stimulate the economy, and discretionary fiscal policy would be needed to combat a recession. In the face of a recession, central banks reduce interest rates, but no central bank can lower interest rates below zero. Fiscal policy, the taxing and spending policies of the federal government, also has the potential to influence economic conditions. Throughout 2002-2004, I remember all the debates made in Congress about what to do with spending and taxes in order to stimulate spending. Taxes were lowered and spending increased. This debate is one of the key differences between fiscal and monetary policy. Fiscal
Macroeconomic Impact on Business Operations
Macroeconomic Impact on Business Operations Introduction Macroeconomics is the study of the economy as a whole. A thriving economy will create money and produce goods and services for consumption. Economic systems are influenced by macroeconomic factors. A country will strive for sustainable economic growth to improve the standard of living for its citizens. Fiscal and monetary policy is used to influence the economy. A well-defined monetary policy has the ability to control an economy and produce sustainable growth. Money Creation Money can be created by a government printing more money or through the banking system. When a government prints more money and spends this in the economy, the actual value of each unit of money already in the economy falls. This reduction of value for each unit of money is known as inflation. When a government prints money to finance a war or other purpose, hyper-inflation usually occurs. One unit of money in the current period is worth substantially less in a near future period. Creating money in this manner is not good for an economy. A better way to create money is to use the banking system. In the United States, the banking system must keep reserves (amounts of money based on deposit levels at the Federal Reserve Bank in non-interest bearing accounts that can not be used for any other purpose) When a bank makes a loan to an individual or
Whether an increase in the rate of inflation in the UK always and solely results from an increase in the money supply
Whether an increase in the rate of inflation in the UK always and solely results from an increase in the money supply. [15] Like the prices of goods are determined by it supply and demand, the relative price of money is determined by the rate of interest. Originally the term 'inflation' was used to describe increase in money supply, but in modern context it now refers to sustained increase in general pricing level. On the other hand, the money supply is the quantity of money issued by a country's financial authority. Assuming that price level do not instantly adjust to equilibrium point, it's the responsibility of the bank of England that rate of inflation is steady; they have to make sure also that AD matches AS, in order to do so, they control the money supply. More money in circulation may stimulate demand, and vice verse. If there is a shortfall of AD relative to AS, then the economy will not be operating in full capacity, in this case, the bank may choose to increase money supply. The additional demand tends to increase in employment, and ultimately to inflation. However as economists like Milton Friedman suggested, banks cannot predicate exact optimum money supply, in turn may lead to wider swing in the economy than if the system was left alone; which may or may not result in equal amount of inflation. As we see, through the monetary exchange equation,
